Delhi-NCR key market for office leasing despite weak demand

Demand from multinationals to set up offices in the NCR region has pushed the average transacted rentals. This is despite a weak off-take in office leasing and fewer transactions.

American Express, Fiserv, Jacob’s, HCL, Micromax and Google were the top space occupiers accounting for approximately 75 per cent of office absorption in Delhi-NCR region for 2012-13.

The preference for this region is going up due to skilled manpower and developed infrastructure. Even micro-markets of Gurgoan and Noida have taken up almost 89 per cent of the total office space transacted.

According to a Knight and Frank research, at least 39 million sq ft of incremental office space entered the NCR market in the preceding five years making it the largest office market in term of stocks. The market showed a steady absorption levels in H1 FY2012-13 followed by a dip in H2 FY2012-13.

The city’s office market clocked absorption of approximately 5.8 million sq ft falling short by 25 per cent compared with FY2011-12. The IT/ITES sector which contributed about 42 per cent of the office demand had adversely impacted demand. This resulted in reduced office space in Q4 FY2012-13.

The report says that 1.07 million sq feet of office space was transacted in Q4 FY2012-13 showing a fall of 11 per cent compared with the same quarter a year ago.

A total of 27 transactions were recorded in Q4 FY13 as against 45 transactions noted in the same quarter in FY12. Interestingly, Banking, Financial Services and Insurance (BFSI) picks up while IT/ITeS dips. BFSI contributed to nearly 23 per cent of total absorption.

A Cushman & Wakefield report also pointed that New Delhi’s Connaught Place has emerged as world’s fourth most expensive office location gaining one position over last year. The report ranks locations across 63 countries to compare the most expensive office destination across the world.

Sanjay Dutt, Executive Managing Director, South Asia, Cushman & Wakefield, said, “India’s corporate office space has been limited with majority of the development being in the IT/ITeS space. Therefore, locations that do offer corporate office space such as central business district (CBD), off CBD, and select micro markets in the suburban districts have witnessed high rental values.”

Anshuman Magazine, CMD, CBRE South Asia, said, “Despite a softening in the commercial office space segment in key cities in India, occupancy costs continue to remain high in prime locations such as of Connaught Place in New Delhi. This is primarily due to low supply of space with very limited new supply expected in the near future. This is especially true for quality office space which has led to occupancy cost remaining high.”

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