Chennai sees 60% growth in office space absorption

Office space absorption in eight major cities in India was down 7 per cent at 18 million square feet in the first nine months of 2017 as against the corresponding period last year.

On the supply side, office space has been greatly constricted in India with a drop of 38 per cent being registered in the top-eight cities.

“The trend for office space absorption has been looking positive despite a seeming slowdown in the early part of 2017,” said Anshul Jain, Managing Director, India, Cushman & Wakefield.

Bengaluru continued to register the highest volume of transaction with approximately 5 million sq ft (msf) of net absorption. Among the cities, Chennai saw a growth of net absorption of 60 per cent year on year (y-o-y), while Hyderabad registered the second highest volume of net absorption at 3.2 msf, albeit both registering a decline from the same time last year. Jain said, “The Chennai market witnessed robust activities in the last few quarters, registering a steady growth quarter on quarter (q-o-q) due an increase in interest from occupiers. Availability of quality office space as well as lower rental values.”

Chennai gives the added benefit to occupiers of a right talent pool in the area. Absorption in the city has been led by sectors such as e-commerce, IT/BPM and BFSI for processing units. As a result, Chennai has seen a significant drop in vacancy bringing it down from 15 per cent in 2015 to 9 per cent in 2017.

Bengaluru on the other hand, has been witnessing inadequate office space supply, which has been restricting the uptake of office space, leading to a decline of 17 per cent y-o-y.

“On a positive note, new inquiries for fresh space for growth and new offices have picked up in the third-quarter (Q3), unlike the previous quarters where the focus on many large occupiers was on consolidation and/or relocation,” Jain said.

Mumbai has emerged as the most stable market from net absorption perspective in 2017 registering total net absorption of 2 msf in 2017 year-to-date (YTD). The market has been receiving steady demand from sectors such as IT/BPO, consulting, BFSI, healthcare and media that have been looking at growth within the city.

Delhi NCR too saw a manageable decline of 3 per cent y-o-y in the YTD net absorption despite a drop in supply of office space.

According to Jain, almost all cities, except Kolkata, saw a decline in commercial office supply.

Mumbai (56 per cent), Pune (51 per cent) and Chennai (47 per cent) have been witnessing a slow development and construction due to numerous reasons ranging from general delays in construction to lack of clarity from the market trends.

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