“A robust business support ecosystem continues to attract occupiers to expand their operations, despite the recent slowdown in the Indian economic growth. In Q3 2019 alone, gross absorption rose 9% to 13.9 million sq feet, from Q3 2018”, said Ritesh Sachdev, Head- Occupier Services, India and Managing Director, South India at Colliers International.
The top seven cities of India recorded gross leasing activity of about 40.1 million sq feet during Jan-September 2019, registering a 9% increase from the corresponding period last year.
Developers rush to complete constructions
The Jan-September 2019 period witnessed 33.8 million sq feet of new completions, 53% higher compared to corresponding period last year. Hyderabad witnessed the highest completions during the period, at 11.9 million sq feet, accounting for 38% of the total supply across the cities. Bengaluru witnessed supply of 10.0 million sq feet, accounting for 30% of the total supply. Both the cities are witnessing sturdy demand, which is now well-backed by solid construction completions.
“This sturdy expansion by occupiers is likely to push up fresh take-up of office space in 2019. Gross absorption in 2019 is likely to exceed the levels seen in 2018 by 7-10%. IT-BPM and technology companies’ leasing accounted for 36% of the total leasing, again suggesting that the demand is becoming more broad-based. Flexible workspace accounted for 18% of the total gross leasing during Jan-September 2019. This is in line with our earlier estimates, wherein we forecast that flexible workspace leasing will account for 18-20% of total gross absorption in 2019,” says Megha Maan, Senior Associate Director, Research at Colliers International India.
Bengaluru tops office demand; Hyderabad pips Delhi-NCR to emerge to 2nd position
Bengaluru maintains the top position in office space leasing, with a share of 30% in gross leasing during Jan-September 2019. Bengaluru recorded gross absorption of 12.1 million sq feet during Jan-September 2019, a 7% increase from same period last year, as occupiers continue to ramp up. IT-BPM and technology companies together accounted for 36%. Engineering and manufacturing sector’s leasing accounted for 18% share. Occupiers are preleasing space, and even taking up space in refurbished grade B buildings, due to tight vacancies in the market amidst healthy demand. The city’s vacancy stood at 8.8% at the end of Q3 2019.
Hyderabad overtook Delhi-NCR to emerge as the 2nd position, in terms of demand, with a share of 19% in gross absorption. During Jan-September 2019, gross absorption rose 84% yoy to 7.5 million sq feet. Hyderabad is the fastest-growing commercial market, as occupiers remain enthusiastic about the pro-investment state government, whose policies support the quality infrastructure development in the city. The city witnessed supply of 11.9 million sq feet, more than a four-fold rise in supply. Despite the heavy supply, Hyderabad’s vacancy stood at 4.5% at the end of Q3 2019 as about half of the buildings that become operational were already pre-committed.
Delhi-NCR, which accounted for the third-highest demand, witnessed a 6% decline in gross absorption to 7.4 million sq feet.
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