Mumbai

Cumulative net office absorption likely to cross 100 mln sqft by 2020: Report

 

As per an estimate by JLL India, the cumulative net absorption of office space is likely to cross 100 mln sqft by end of 2020 in the top eight Indian cities as the uptake is expected to grow approximately at a CAGR of 8% over 2017. These eight property markets include Mumbai, Delhi-National Capital Region, Bangalore, Chennai, Hyderabad, Pune, Ahmedabad and Kolkata.

 

The office space segment has been witness to robust demand trends which will be fructified in the next 2 -3 years keeping the office leasing activities buoyant and in an upward movement.

 

The estimate expects net absorption of 30.2 mln sqft of office space during 2018. This would mean a moderate growth of about 5% over 2017 figures, but the next two years should see healthy increase in net absorption of Grade A office spaces at average of 10% year-on-year giving the office absorption market a stable momentum. 

 

“The office space absorption growth is directly dependent and indicative of economic factors like the growth in GDP, access to institutional capital and stability in the market. India is on a steady rise on global charts as a business location. Demand is expected to come both from domestic as well as global companies in India. Our estimates of growth sectors impacting the office absorption for the next three years are IT/ITeS, e-Commerce and related businesses, BFSI and FinTech companies and business consulting and services firms,” said Ramesh Nair, CEO & Country Head, JLL India.

 

The estimated net absorption for office space in the various cities for 2018 would be strong with Bangalore expecting around 7-9 mln sqft of net absorption leading the volumes. Mumbai is estimated to see 6-7 mln sqft of net leasing activities in 2018. Chennai, Hyderabad and Pune will remain in the range of 4-5 mln sqfteach in this year, while Kolkata could see anywhere between 1 -2 mln sqft of office space absorption in 2018.

 

On the supply side, the estimated supply for the next 3 years is pegged at 116 mln sqft which would also grow at a CAGR of 15% from 2017 to 2020. The year 2018 is expected to see a total supply of 36 mln sqft adding over 33% space over 2017. Post that, supply will see a moderate growth rate of 7% year-on-year.

 

The surge in supply in 2018 will be the catalytic push to demand for Grade A office space. 2017 saw a significant decline in supply leading to pent up demand which once new supply comes into the market will get absorbed maintaining the vacancy rates between 12% - 14% on an average.

 

A stable vacancy level indicates steady rentals in most locations as well. JLL India expects rentals to grow between 5% - 8% year-on-year albeit only in high demand micro-markets of SBD and IT corridors of in key markets. The rest of the markets are expected to hold fort to the current values.
 

Written by The Realty Paper


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