Tag Archives: commercial real estate

Bengaluru leads office absorption; gross office take-up reaches 9.5 mn sq ft in Q2 2017

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News Point: Steady demand to continue in H2 2017, upward pressure on rents likely in south cities, finds Colliers Research.

Bangalore office space, JLLM, Jones Lang LaSalle Meghraj, Track2Media, Track2Realty, ravi sinha, india realty news, india real estate news, real estate news india, realty news india, india property news, property news india, KP Singh, DLF, Unitech, Emaar MGF, ndtv.com, ndtv, aajtak, zee news, india news, property news, real estate news, 99acres.com, 99 acres, indianrealtynews.com, indianrealestateforum.comIndiabulls real estate, BSE, Bombay Stock Exchange, Mumbai Real Estate, India Property, Track2Media, Track2Realty, ravi sinha, india realty news, india real estate news, real estate news india, realty news india, india property news, property news india, KP Singh, DLF, Unitech, Emaar MGF, ndtv.com, ndtv, aajtak, zee news, india news, property news, real estate news, 99acres.com, 99 acres, indianrealtynews.com, indianrealestateforum.com, Indiabulls real estate, BSE, Bombay Stock Exchange, Mumbai Real Estate, India PropertyDespite delayed implication of demonetisation and recent layoffs by technology companies, due to automation and changing technology, commercial market continued to remain resilient, backed by sustained expansion plans of the major occupiers. The Gross office take-up in India amounted to 9.6 mn sq ft (882,800 sq m) in Q2 2017 representing a nominal 2% increase Q-o-Q from 9.3 mn sq ft (Total office absorption in H1 2017 stands at ~18.9 mn sq ft, as per Colliers Research marginally down by 2% from, H1 2016)

“Real Estate has seen a series of challenging regulatory impediments in its performances, with demonetization, RERA and now GST. In the post-GST era, service tax (15%) in commercial leases will be replaced with GST at 18%. However, we expect demand to remain steady, with some large activities of consolidations and relocations in Bengaluru, Mumbai, Pune and NCR. Hyderabad witnessed sharp rise in demand from 0.51 million sf to 1.6 million sf QoQ, which is more that double. Overall office demand is expected to see steady rise in take up for next few quarters”, Ravi Ahuja, Executive Director, Office Services & Investment Sales, Colliers International India.

As expected, Bengaluru continued to dominate the office market and recorded an overwhelming share of 34% of total leasing volume, followed by NCR at 19% and Hyderabad at 17%. Mumbai, Chennai, Pune and Kolkata accounted for 13%, 11%, 4%, and 2% respectively, on overall leasing volume.

“Despite, recent layoffs’ alert by technology companies due to automation and changing technology, we expect the commercial market to remain resilient backed by sustained expansion plans of the major occupiers. July onwards, India adopted a multi-tiered Goods and Services tax (GST) structure. Although it will result in marginal increase in occupancy costs, we do not expect any adverse impact on demand. GST implementation should bring operational efficiency and widen the tax base, leading to higher revenues, infrastructure spending and more investment in the country. The influence of recent adoption of the goods and services tax (GST) and increasing interests of investors in warehousing sector should be noticeable events to watch out for in H2 2017”, Surabhi Arora, Senior Associate Director, Research, Colliers International India.

Bengaluru 

With approximately 3.25 million sq ft (0.3 million sq m) of gross absorption, Bengaluru remained the most active office market in India. Although, the q-o-q numbers represent a marginal decrease of about 7% (3.5mn sq ft in Q1 2017) in gross absorption, we expect the leasing momentum to continue in the coming quarters.  About 43% of the total leasing was concentrated in Special Economic Zones driven by a couple of large size (above 100,000 sq ft) transactions.

We expect leasing activity to be dominated by small and mid-size transactions as BTS options are expected to remain the preferred choice among occupiers with large size requirements in prime corridors. Despite a supply pipeline of nearly 3.0 million sq ft (0.3 million sq m) in H2 2017, new occupiers with large size requirements may find it difficult to lock in long-term leases. The small and mid-size occupiers should consider flexible workspaces to leverage on their location and the ease of operation they provide.

Delhi-NCR

NCR recorded gross absorption at 1.8 million sq ft (from 1.57 mn sq ft in Q1 2017), Gurgaon with 50% of total NCR absorption remained the preferred choice among occupiers followed by NOIDA and Delhi that shared about 30% and 20% respectively.

The gross leasing volume in Gurgaon reached about 0.9 mn sq ft (83,612 sq m) marginally up from last quarter numbers. While NOIDA’s commercial market witnessed sustained interest from occupiers in Q2 2017, resulting in absorption of about 0.5 million sq ft (46,400 sq m) of Grade A office space; marginally up from the previous quarter. About 70% of this demand was contributed by the technology sector, including e-commerce and fintech companies. In Delhi, the corporate leasing activity remained stable with gross absorption standing at only about 0.42 million sq ft (39,019 sq m), up by 27% q-o-q.

Hyderabad

Commercial leasing revived with about 1.6 million sq ft (145,300 sq m) of gross absorption in Q2 2017 versus just 0.51 million sq ft (47,300 sq m) gross leasing activity in Q1 2017. Regardless of the anxieties about lay-offs and automation in the technology sector, the industrial sector continued to expand and accounted for 92% of overall office leasing in the city. As per Colliers International, the Central Business District (CBD), off-CBD and PBD micromarkets recorded 5%, 4% and 2% of the remaining share in gross leasing respectively.

Mumbai

In Q2 2017, the gross absorption was recorded at 1.2 million sq ft (0.1 million sq m) down from 1.7 mn sq ft in Q1 2017. Except for a few large transactions, the average deal size remained low at 15,400 sq ft (1,430 sq m). Despite a 29% decline in transaction volume from Q1 2017, we expect absorption to improve in Q3, with a few large size transactions in the pipeline totaling to 0.75 mn sq ft (70,000 sq m). We expect future demand to be reinforced by data centres, coworking operators, logistics and warehousing companies, looking at the increased enquiries from these sectors.

Chennai

The gross absorption in Q2 2017 for Chennai recorded about 1.1 million sq ft (92,903 sq m) of gross absorption (same as in Q1 2017). The market witnessed a shift in occupier focus towards the OMR-Post toll belt, which increased its share in gross leasing to 33% in Q2 2017. With sturdy expansion and relocations, OMR-Pre-toll accounted for 26% of the market, while the intracity locations in Central Business District (CBD) and off-CBD micromarkets accounted for 12% and 16% respectively. Moreover, with sizeable transactions in Ambattur, the micromarket represented 7% of gross absorption and the remaining 6% was recorded in Mount Poonamalle High (MPH) Road.

Pune

The unavailability of quality supply further affected the overall leasing volume in Q2 2017. The gross leasing was recorded at only 0.4 million sq ft (37,861 sq m) in Q2, which represents a 48% decrease from Q1 (0.78 million sq ft in Q1 2017). With no supply pipeline visible in 2017, we expect the absorption rate to remain low in coming quarters. Although, Pune is one of the major IT-ITeS markets in India, banking, financial services and insurance (BFSI) accounted for a 30% share of total absorption, followed by IT-ITeS (26%), other industries (23%), engineering and manufacturing (13%) and healthcare (7%).

Kolkata 

Sustained leasing momentum was observed in Q2 2017 with 0.2 million sq ft (18,500 sq m) of gross absorption, similar to absorption in Q1. The occupier demand was driven by relocations and expansions. The bulk of leasing volume equating to 79% was concentrated in Sector V while peripheral areas like New Town and Rajarhat accounted for an 18% share. The remaining 3% of the transaction volume was observed at CBD locations. H1 2017 had witnessed more enquiries since the last two years; hence we expect leasing activity to intensify in upcoming quarters.

 

26% drop in office space absorption in Q1 2016

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Bottom Line: Following a strong fourth quarter of 2015, the first quarter of 2016 was sluggish as most corporate space occupiers were still strategizing their real estate plans for the year. 

Office Space, Commercial Real Estate, Office occupancy, Indian property market, India real estate market, Indian realty news, Track2Media Research, Track2RealtyApproximately 5 million sq. ft. of prime office space was absorbed during Q1, 2016 (Jan – March) – a drop of approximately 26% year-on-year – according to CBRE’s India Office Market View – Q1, 2016 report.

According to the report, corporate real estate space take-up during the quarter was led by Delhi National Capital Region (NCR) with a share of 31% of total transacted space in the leading cities, followed by Mumbai (23%) and Bangalore (17%).

Corporate occupier interest remained concentrated towards prominent micro-markets such as Gurgaon in Delhi NCR; Thane, Navi Mumbai, Vikhroli, Goregaon and Andheri in Mumbai; Koramangla, Whitefield and Electronic City in Bangalore; IT Corridor in Hyderabad; and Viman Nagar in Pune.

Occupiers were also seen pre-committing space in under-construction developments, primarily in Mumbai and Gurgaon, largely led by the lack of available space in investment-grade developments at prime locations.

Commenting on the findings of the report, Anshuman Magazine, CMD, CBRE South Asia said, “While the first quarter of the year traditionally witnesses muted transaction activity, the overall sentiment among India’s corporate space occupiers is optimistic. Besides, India continues to remain one of the global key outsourcing destinations which will improve the momentum going forward.”

Almost 47% of the leasing activity in the quarter was concentrated in IT developments. Leading SEZ properties in Chennai, Bangalore, Gurgaon and Noida also witnessed considerable traction, accounting for about 14% of total transaction activity. Most SEZ transactions were the culmination of pre-commitments made by corporate occupiers in previous quarters for their office requirements.

In terms of supply, approximately 7 million sq. ft. of new office space was completed in the quarter with smaller cities such as Kolkata, Hyderabad and Pune accounting for about 68% of the total supply released during the quarter. Pune led project completions, generating about 25% of the total supply released during the quarter across leading cities. Commercial (non-IT) projects accounted for about half of the overall supply that came on-stream in Q1 2016.

“Industry sectors such as IT/ITeS and banking / financial services are likely to remain the dominant demand drivers for office space in the country, with manufacturing / engineering, e-Commerce, and pharmaceuticals being the other active sectors that are likely to generate demand for corporate real estate space. Occupiers are also likely to keep a strong check on space utilization ratios and innovate on their workplace strategies. Demand for SEZ space and pre-commitments in projects nearing completion are expected to continue to improve in the coming months,” said Ram Chandnani, Managing Director – Transactions Services, CBRE South Asia.

Increased occupier demand in quality IT and IT SEZ projects in Malad/Goregaon in Mumbai; DLF Cybercity in Gurgaon; Noida Expressway in Noida; Guindy, Velacherry, Perungudi, Mount Ponnamalle Road and Taramani in Chennai; Aundh Baner, Viman Nagar, Hinjewadi and Kharadi in Pune; and IT and Extended IT Corridors in Hyderabad, resulted in a q-o-q rental appreciation of 2–10% across these micro-markets.

Office space absorption rises to 30 million sq ft till September: Colliers

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Office Space, Commercial Real Estate, Office occupancy, Indian property market, India real estate market, Indian realty news, Track2Media Research, Track2RealtyOffice space take-up by corporates in the first nine months of the 2015 calendar year rose to 30 million sq ft, 11% more than 27 million sq ft in the same period last year, according to a new report by property consultancy Colliers International.

The consultancy anticipates the momentum to continue in the coming quarters.

“With a number of deals at advance stages, we anticipate momentum in office market to continue. Cities like Bengaluru, Gurgaon and Mumbai is set to witness maximum office uptake in the coming quarter,” said Surabhi Arora, associate director – research at Colliers India.

Corporates leased around 10.6 million sq ft of office space in the September quarter this year, a marginal rise from 10.5 million sq ft in the previous quarter.

Gurgaon marched ahead of Bengaluru and Mumbai in terms of office absorption, accounting for 23% of the total space absorbed across India in the September quarter, followed by Chennai at 20%, Bengaluru at 18%, Mumbai at 15%, Noida at 11%, Pune at 9%, Delhi at 4% and Kolkata grabbing 2% share.

Gurgaon witnessed an 18% QoQ rise in office absorption to 2.1 million sq ft in the September 2015 quarter, totalling to about 4.9 million sq ft till September this year, backed by demand from the IT/ITeS sector, which grabbed 60% share. The banking and financial services industry followed with 20%.

NH 8 (National Highway 8) remained the most preferred micro market in Gurgaon, sharing about 29% of total office absorption, followed by Golf Course Road 25% and Udyog Vihar 21%.

“Due to location advantages and affordable rents, micro markets like Udyog Vihar, institutional sectors and NH8 will continue to garner the occupiers’ interest,” Arora said.

Mumbai recorded a total of 5.95 million sq ft of office space absorbed till September this year, with about 1.4 million sq ft leased in the September quarter. Bandra Kurla Complex (BKC) remained the most preferred location with 32% of total office absorption, followed by Western Suburbs (Dadar, Goregaon, Andheri and Jogeshwari) at 28% and Central Mumbai (Worli, Dadar, Lower Parel) at 17%.

Bengaluru recorded 1.6 million sq ft of office absorption in the September quarter, taking the total to over 8 million sq ft in the first nine months this year. IT/ITeS companies leased 56% of the office space in the September quarter, followed by manufacturing at 16% and BFSI at 10%.

While cities like Chennai, Delhi and Noida recorded a rise in office absorption in the September quarter to 1.82 million sq ft, 0.33 million sq ft and 0.98 million sq ft, respectively, Pune and Kolkata witnessed a drop of 55% and 30% to 0.83 million sq ft and 0.2 million sq ft, respectively.

 

Ascendas set to raise $350 mn

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Ascendas India Development Trust, commercial real estate, india real estate news, realty news india, property news india, indian realty news, track2realty, track2media, ravi sinhaAscendas India Development Trust (AIDT), the India-focused real estate fund floated by Singapore-based office space developer, is looking to raise close to $350 million. This will be the second fund that AIDT will be raising after investing its first fund of around $400 million.

According to senior officials at Ascendas India, the trust will be shortly initialising steps to raise the funds from global investors. The new fund will be used to part-fund its expansive projects coming up at Gurgaon, Chennai, Coimbatore and Pune spread over 200 acres across the cities.

Ascendas had launched AIDT during June 2007, a private real estate fund focusing on integrated property developments in India. An official spokesperson for Ascendas India however said they are yet to finalise the size of the second fund.

Ascendas has presence in more than 30 cities in 10 countries, across key markets such as Singapore, India, China, South Korea, Vietnam, Malaysia and the Philippines and has $8 billion assets under management and 45 million square feet under management.

In addition to AIDT, which funnels investments into greenfield projects, the company manages another fund — Ascendas India Trust (AIT), which holds its completed projects in India. AIT, listed on the Singapore Stock Exchange, owns around 7.9 million square feet of completed business space spread across Bangalore, Chennai and Hyderabad, with an asset size of around Rs.6,000 crore.

According to AIDT officials, it is developing an IT SEZ project at Gurgaon spread over nearly 65 acres, a 25-acre IT SEZ at Pune, a 53-acre integrated development at Coimbatore and integrated townships in Chennai and Gurgaon.

As part of its strategy to expand its footprint in India, AIDT, during February 2011, acquired a portfolio of five IT parks in Hyderabad from Phoenix Infocity with a total value of a little over Rs.850 crore. While AIT is acquiring the two completed buildings, with a total super built-up area of 0.4 million sq ft for Rs.173 crore, the remaining three buildings, with a total super built up area of 1.8 million sq ft, will be acquired as and when the buildings are completed and leased.

The pricing of the three buildings will be based on the net property income achieved at the time of acquisition which is currently estimated at Rs.680 crore.

Despite the growth, Ascendas India Chief Executive Officer Thomas Teo felt there were some hurdles on the way to its expansion plans in India.

“The STPI scheme is coming to an end and there was still no clarity on tax structures for SEZs. We are constantly in dialogue with the Government of India on these issues and let us see how it pans out,” Teo told Business Standard.

Teo, who recently took over the Indian operations of Ascendas, felt that although there was severe competition by local players, the company will not get into rate cuts to attract clients. “Lease and rents are a matter of subject which we look into closely on a frequent basis. However, with our integrated projects, we are able to attract a premium from our customers, which reflects in the 95 per cent occupancy rates across our projects.”