Real Estate

Bengaluru leads office space demand in Q1

Anil Urs Bengaluru | Updated on April 11, 2018

Bengaluru continued to lead leasing activity across India in the first quarter (Q1) of the year 2018, registering a quarter on quarter (q-o-q) growth of 50 per cent, said CBRE South Asia.

In its latest India Office MarketView, CBRE said during the review period (Q1), the market also witnessed significant supply addition, a sign of long-term growth of the market and its continued attractiveness to domestic and foreign corporates.

Outer Ring Road (ORR) and the Central Business District dominated leasing activity and was primarily concentrated in non-SEZ developments. As has been the trend, a majority of this absorption was the culmination of pre-commitments.

Leasing activity was primarily driven by BFSI corporates followed by e-commerce, research, consulting and analytics and tech firms. Co-working/business centre operators continued to be active in the city.

During the review period, leasing activity across India’s top eight markets was at an all-time high. Close to 11 million square feet of space take-up was recorded—a 25 per cent increase from Q1 2017. This is a departure from the norm as the Q1 of the year usually witnesses subdued activity because corporates are still finalizing their business strategies. During the January to March period, Bangalore reported the highest demand for office space and accounted for more than the combined share of the markets of Delhi–NCR, Mumbai and Hyderabad.

In the Delhi-NCR region, Gurgaon dominated leasing activity.New supply consisted of a few medium-sized non-IT developments in Gurgaon and an SEZ development along the Noida Expressway. Leasing activity was primarily driven by the tech sector, followed by corporates from the research, consulting and analytics, and BFSI sectors, the report said.

The the quarterly leasing activity in Mumbai witnessed an uptick. More than half of the leasing activity was in the Secondary Business District (SBD) and the Peripheral Business District (PBD) of Powai and Vikhroli. The report pointed out that BFSI firms and co-working operators dominated leasing activity, followed by firms from infrastructure, real estate and logistics. It also showed that Rental values remained stable during the quarter.

After robust activity last year, the city of Hyderabad witnessed a marginal decline in leasing activity during the quarter, the report says. Supply addition was limited to one medium-sized development in the extended IT corridor. Tech firms, followed by engineering and manufacturing and healthcare firms, dominated leasing activity in Hyderabad. Rental values increased across all micro-markets, thanks to continued occupier interest and shortage of new supply.

In Chennai, transaction activity was led by small-sized deals, mainly by corporates looking to consolidate/ relocate operations. The report showed that the leasing activity declined marginally while supply witnessed an uptick in this period. However, tech corporates continued to lead demand in the city. Rents in the city increased by about 5-7 per cent in IT buildings in OMR Zone I, due to low vacancies and sustained corporate interest.

Pune saw an increase in supply addition while leasing activity declined marginally. Tech firms continued to dominate space take-up, followed by engineering and manufacturing companies. PBD accounted for more than half of the city’s leasing activity during the review period Select micro-markets in the city witnessed quarterly rental growth.

Quarterly leasing activity and new supply addition declined marginally in Kolkata. However, rentals remained stable across all micro-markets. Demand was largely driven by occupiers from the engineering & manufacturing, and telecommunication sectors, followed by BFSI and co-working firms.Kochi witnessed a marginal increase in leasing activity. Rentals remained stable during the quarter and the demand was driven by tech firms, the study said.

Ram Chandnani, Managing Director, Advisory & Transaction Services, India, CBRE South Asia said, “Over the past several quarters, pre-commitments by occupiers in under-construction projects have impacted leasing activity across India’s office market. Constrained supply of ready-to-move-in space, coupled with rising rentals, has led to this trend gaining traction in recent months.” “The uptick in leasing activity in the first quarter is largely due to several projects getting completed,” he said.

“Going forward, as corporate continue to evaluate cost-effective options and stagger their expansion plans, pre-commitments in under-construction projects will have a significant impact on office leasing activity across key cities,” he added.

Published on April 11, 2018

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