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India is likely to see total of 34.2 million square feet commercial real estate by the end of fourth quarter (Q4) of calendar year 2016. The demand is mainly driven by sectors such as manufacturing, logistics, and FMCG.
“As we get the final readings for 4Q2016, achievement of 34.2 million sq ft is on the back of healthy absorption and pre-commitments,” said Anuj Puri, Chairman & Country Head, JLL India.
“Out of these 34.2 million sq ft, the net pan-India absorption up to 3Q16 stood at 26.4 million sq ft. Although availability of right space at right location remains a challenge for many occupiers,” he added. JLL predicts that in 2017 about 38-40 million sq ft of new space is expected to add mainly due to more investment in infrastructure, tier-II cities such as Pune, Hyderabad and Chennai are expected to drive office demand.
Quality spaces are already available at competitive rentals in tier-II cities compared with tier-III and tier IV cities, and the former is expected to see more supply in the years ahead.
“Even as vacancy lowers across key cities, the supply of good quality assets continues to diminish. Vacancy in high-quality assets is far lower than average vacancy. Assets of poorer quality or at inferior locations or which are strata-sold (in Delhi-NCR and Mumbai) have a much higher vacancy, except in the IT cities like Bengaluru, Pune, Hyderabad and Chennai,” said Puri.
Scarce supply“The scarce future supply may limit the absorption to be realised. The net absorption in 2017 is likely to be lower than this year due to scarce supply, and this may be acute in Chennai and Pune,” he added.
Rents are expected to grow even in Grade-B buildings and in certain micro-markets. The pace of rental growth will not be uniform across cities and micro-markets, as some may have run their course already.
Talking about the demand, Puri said, office space required by eCommerce/ start-ups and consulting firms rose, as these sectors are expected to continue with headcount addition to accommodate their business growth in the years to come.
“International banks and financial institutions are under increased cost and compliance pressures and are therefore expected to outsource more jobs to India. Depreciation of the rupee versus the US dollar and euro is likely to play a major role in this.”
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