Demand for corporate office space across India improved with more than 9 million sq ft of commercial office space being taken up in the top seven cities of the country during the July-September quarter of 2015, said property advisory firm CBRE.
The quarter has seen annual growth in absorption of about 20% and a quarter-on-quarter increase of around 6%.
About 31% of the office space taken up by corporates in the September quarter was in the Delhi National Capital Region (NCR), according to the CBRE report.
Office leasing was primarily driven by requirements of corporate firms in the IT/ITeS sector (nearly 50%), followed by the banking / financial services sector, and e-commerce companies. After registering a high share of 14% in Q2 2015, e-commerce saw a drop in transactions with a share of just about 4% in Q3 2015.
“Industry sectors such as the IT/ITeS and banking/financial services are likely to remain the major demand drivers for office space in our leading cities during forthcoming quarters as well. Going forward, other active industries that are expected to provide an impetus to demand for corporate real estate space are manufacturing / engineering, e-commerce, research / consulting, and pharmaceuticals,” said Anshuman Magazine, chairman and managing director of CBRE, South Asia.
Gurgaon remained the most preferred destination for corporate occupiers in the NCR. Delhi NCR was followed by Bangalore with a share of 22% of the total transacted space in the quarter, and Chennai with a share of 17%. The Mumbai, Pune and Hyderabad office markets also attracted healthy inquiries from corporate occupiers, but space take-up remained low in these cities during Q3 2015, the report said.
More than 10 million sq ft of fresh investment-grade office space was completed across key cities during the quarter, leading to a q-o-q rise of around 21% and 44% on a y-o-y basis. Bangalore led new supply addition of office space during the July-September period. Overall office space supply addition in Q3 2015 was the highest over the previous nine quarters.
“The July-September period saw a strong infusion of new office space coming into the market. At the same time, some of the supply pipeline was pushed forward to the next few quarters. Most of this upcoming supply is concentrated in key micro-markets of the leading cities. We expect these projects to see some traction from pre-leasing activity in the coming quarters,” said Ram Chandnani, managing director, transactions services at CBRE South Asia.
Rental values remained largely stable in the Central Business Districts of most leading cities during the period. A steady rise in office space demand led to a q-o-q rental rise of 2-7% in prominent IT and SEZ developments of Gurgaon; Guindy, Mount Poonamalle Road and Ambattur in Chennai; IT Corridor in Hyderabad; and of Aundh, Hinjewadi, Kharadi and Baner in Pune. Bangalore also saw a steady q-o-q rental appreciation of around 2-6% across office locations. Rental values of office spaces in Mumbai and Kolkata, however, remained stable, CBRE said.