Real Estate

Tech sector office space take-up rises by 40% in 2019

Anil Urs Bengaluru | Updated on January 13, 2020 Published on January 13, 2020

Bengaluru, followed by Hyderabad, Delhi NCR and Mumbai, led leasing, together accounted for almost 75 per cent of the overall space take-up

The share of the technology sector in 2019 in overall office space take-up rose from about a third in 2018 to almost 40 per cent. With overall space take-up by tech firms rising by more than 45 per cent on an annual basis.

This growth in office space take-up was primarily driven by global multinationals, which accounted for more than 70 per cent of the overall space take-up by tech firms this year.

The share of research, consulting and analytics firms has increased to 5 per cent in 2019 from 4 per cent in 2018. The collective share of sectors such as engineering and manufacturing, BFSI, e-commerce and research, consulting and analytics, dropped from almost 36 per cent in 2018 to 31 per cent in 2019.

Several of these corporates continued to show interest in SEZ spaces despite the upcoming sunset clause deadline; as a result, SEZs accounted for about one-third of the leasing activity in 2019.

Meanwhile, occupiers continued to opt for flexible spaces, with the share of the segment rising from 12 per cent in 2018 to about 14 per cent in 2019. Meanwhile, occupiers are likely to continue to asses agility in their real estate portfolios with the ‘core plus flexi’ strategy finding more takers.

Ram Chandnani, Managing Director, Advisory & Transaction Services, India, CBRE South Asia said, “Several occupiers are likely to adopt newer workplace strategies to realign their portfolios by trying to find the right mix of agility within their core workplaces along with adding external flexible options (especially managed spaces). Tech and workplace transformation will continue to be high on occupiers’ priorities, thus putting employees at the epi-center of all real estate strategies.”

“Going forward, occupiers are expected to become more conscious about the well-being of their employees, the communities they operate in, sustainability and the broader environment. We also expect that office assets would continue to be a part of future REIT portfolios in India, thus further boosting investor and developer interests going forward,” he added .

Rise in pre-leasing

Occupiers continued to future-proof their portfolios and hedge against future rental escalations by pre-leasing space across various cities. In 2019, more than 20 million square feet of pre-leasing activity was recorded mainly in Bengaluru, Hyderabad, Pune and Mumbai. More than 52 million square feet of new office supply added in 2019; led by Hyderabad, followed by Delhi NCR, Bengaluru and Pune.

In 2019, supply addition rose by about 50 per cent y-o-y to touch 52.4 million sqaure feet, said Chandnani.

He further said, “The growth in supply additions in 2019 was a result of buildings receiving much-awaited occupation certificates across cities, as well as pre-commitments made in the prior years which came to fruition through 2019. This led to space take-up scaling a historic high. The supply is likely to normalise in 2020, resulting in absorption growth in the coming year to plateau and be in line with the supply.”

Hyderabad followed by Delhi NCR, Bengaluru and Pune dominated development completions, accounting for almost 80 per cent of the overall 2019 supply. In comparison, the share of SEZs in supply dipped from 40 per cent in 2018 to 27 per cent during 2019; mainly led by Hyderabad, followed by Bengaluru, Pune and Chennai.

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Published on January 13, 2020
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