Data from the property consultant CBRE South Asia show commercial leasing activity crossing 32 mln sqft, up 7% from the year ago period, across India’s top 8 property markets in the first three quarters of 2018.
Office space absorption during the September quarter rose 3% from a year ago and 12% sequentially to 10.9 mln sqft with almost 80% of the leasing activity taking place in Mumbai, Bengaluru, Hyderabad and Delhi NCR.
Occupiers from technology sector, with a share of 48% of total leasing, have been the key drivers of office space take-up in the country during the Q3. Occupiers from engineering and manufacturing sector with 14% share were followed by co-working and business center operators that absorbed 11% of the total leased space.
“India’s economic growth continued on its upward trajectory and real estate services along with financial and professional services sector contributed to this economic surge as it grew from 5% in the previous quarter to 6.5% during the review period. Sectors such as BFSI, engineering & manufacturing, and agile/ co-working/business centers are likely to account for a larger share in leasing activity going forward,” said Anshuman Magazine, Chairman, India and South East Asia, CBRE.
Interestingly, India had witnessed 42 mln sqft office space absorption in 2017, while first nine months of 2017 had seen absorption of 30.1 mln sqft.
Even as several mid-to-large-sized deals were reported in Bengaluru, Hyderabad, Pune and Gurugram, more than 30% of the transaction activity was reported in SEZ space.
Similar to the previous quarters, office space take-up was dominated by small- and medium-sized transactions. Mid-sized transactions ranging between 10,000 - 50,000 sqft accounted for around 45% of the transaction activity, while small-sized transactions less than 10,000 sqft had a 42% share. The share of large-sized deals with over 1 lakh sqft size increased to 7% during the quarter.
The agile workspace sector continued to witness a strong growth momentum, with global and Indian majors expanding their footprint in tier 1 and tier 2 cities. Co-working and business operators leased about 3.3 mln sqft space in the first three quarters of the year, almost doubling their take-up reported in the first three quarters of 2017. Other sectors such as Banking, Financial Services and Insurance (BFSI) with 7% share also contributed to the increase in leasing activity.
“The trend of agile spaces is rising during a booming start-up era, even as corporate are drawing up fluid expansion and occupation plans. Occupiers are also expected to keep strong checks on space utilization ratios and innovation in workplace strategies while expanding their footprint and implementing their expansion plans. Also, SEZs are expected to account for a larger share of the upcoming supply over the next few quarters. Given the approaching sunset date, we anticipate an increase in demand for SEZ s space,” said Ram Chandnani, Managing Director, Advisory & Transaction Services, India, CBRE South Asia.
Pre-leasing activity rose in during the quarter, largely in Bengaluru and Hyderabad, driven mainly by tech and BFSI corporates. Overall, the country was witness to more than 12 mln sqft of pre-commitment transactions in mostly under-construction assets in the first three quarters of the year, the report said.
On the other hand, supply addition during the quarter fell marginally by 1% from a year ago to 7.1 mln sqft. Bengaluru and Kochi accounted for 60% of the quarterly supply addition, followed by Mumbai and Hyderabad. But for Pune, Kolkata and Kochi, all cities reported a dip in development completions on a quarterly basis. Slippages were reported in cities such as NCR, Mumbai and Hyderabad.