According to a CBRE South Asia report, annual uptake of office space in India surpassed 42 mln sqft in 2017, indicating continued growth of this segment. And, over 50% of annual leasing activity was reported from Bengaluru and Delhi-National Capital Region. Annual supply for prime office space was over 29 mln sqft during the year, a decline of about 18%.
The primary driver of the leasing activity in 2017 was the IT sector with a 32% share of the total leasing. Other segments that drove demand for office space across key cities were BFSI with 19% share, engineering and manufacturing with 17% and research consulting and Analytics firms with 8% proportion.
Demand for co-working space continued to witness an uptick, almost quadrupling in 2017 to touch 2.6 mln sqft, with both global and domestic players continuing to expand their operations in key cities like Bengaluru, Gurugram and Mumbai, the report added.
On an annual basis, the Southern cities of Bengaluru, Hyderabad and Chennai saw a rental increment across almost all micro-markets. Delhi NCR, on the other hand, witnessed a rise in rental values in core locations only. Almost 90% of all transactions in 2017 were for small to medium-sized spaces. The share of global corporates operating in the country also increased during the year.
“After a record 2016, the growth momentum of India’s office market continued in 2017 as well. Despite various disruptions including the advent of technology and new office formats, overall demand for office space remained robust,” said Anshuman Magazine, Chairman –India & South East Asia, CBRE. “While key metros continued to witness activity, we are seeing several smaller cities emerging as preferred locations by corporates looking to expand their footprint in the country. Hyderabad was one such city which has witnessed significant activity and demand for office space in the past 12 months.”
The demand for office space is expected to remain steady across key locations in the country including smaller cities that could also see a rise in demand, on the back of healthy supply introduction in these locations.
“Due to the limited availability of ready to move in Grade A supply, occupiers with medium and large size requirements will focus on pre-commitments in under construction/built-to-suit developments across key micro-markets in the leading cities in the country,” said Ram Chandnani, Managing Director – Advisory & Transaction Services India, CBRE South Asia.
On a quarterly basis, sustained occupier interest resulted in leasing activity rising by about 18% sequentially, crossing 12 mln sqft in the October to December 2017 period. While Bengaluru and Delhi NCR continued to remain the key drivers, Hyderabad overtook Mumbai in terms of office leasing during the quarter. Supply addition during the quarter was nearly 11 mln sqft.
Similar to previous quarters, space take up was dominated by small and medium-sized transactions. Almost 45% of all transactions were for small-sized (less than 10,000 sqft) spaces while 43% was for medium-sized spaces. The share of large-sized deals (greater than 100,000 sqft) was similar to the previous quarter, garnering a share of 5%. Bengaluru and Gurugram dominated large-sized deal closures, along with a few deals closed in Mumbai and Hyderabad.