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Bengaluru witnessed low office space absorption in third-quarter (Q3) as companies moved towards captive built-to-suit spaces or have relocated to recently built spaces.
The city witnessed total office leasing activities of 2.7 million square feet in third-quarter (Q3) of 2015.
“Net absorption was relegated to only about 6 lakh square feet, as a number of companies moved to captive built-to-suit spaces or relocated to recently built spaces,” said Sanjay Dutt, Executive Managing Director (India), Cushman & Wakefield.
High demand“Lower availability of ready space for absorption has led many corporations to hold on to their decisions of expansion in the short-term, as most office spaces, which will come into supply in the next few months, are already pre-committed to,” he added. Even the currently vacated spaces are high in demand and expected to get leased in a short time.
This tilt towards demand is expected to hold for a short period of time, till supply starts to match up with demand in the New Year. Bengaluru is expected to see upwards of 10 million square feet of net absorption by the end of 2015.
Dutt said, “As the economy stabilises and with companies looking at consolidation and expansion, especially in the case of IT/ ITeS sectors, quality space is now the key factor governing the supply side dynamics.”
“Going forward, we are seeing strong supply pipeline this year as investors are taking a keen interest in commercial office assets. We expect demand for office space to remain robust as corporates continue to relocate, expand and adopt workplace transformation strategies,” he added.
The tilt in the market towards future supply in the form of pre-commitment will be critical in deciding the next course of action for developers, who have so far been most busy with offloading existing stock.
According to Dutt, “With expected supply for 2016 being as much as 62 million square feet, the rise in pre-commitments will be reassuring for developers. However, a matter of caution in this respect is the sharp decline in net absorption, as this may lead to rise in vacancy in short to medium time owing continued non–occupancy of stock, even while future supply gets pre-committed.”
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