9.6 mn sq ft Grade A office space absorbed in Q3

Nearly 9.6 million sq ft Grade A office space was absorbed during the July-September quarter of this year, a report said.

According to a study of nine major metros by property consultant Colliers International, office absorption witnessed sustained momentum, with Grade A absorption totaling 9.6 million sq ft, making it 28.26 million sq ft so far in 2016.

“Although Q3 2016 marked a quarter-on-quarter decrease of 7.6 per cent in gross leasing volume, we expect leasing activity to pick up in the upcoming quarters,” it added.

As per the survey, southern cities dominated the office absorption pie with Bengaluru at the top (25 per cent), Hyderabad (20 per cent) and Chennai (11 per cent), followed by Gurugram (13 per cent), Mumbai and Noida (10 per cent), Pune (8 per cent), Delhi (2 per cent) and Kolkata (1 per cent).

“Vacancies are set to decline in prime commercial corridors on the back of rising demand momentum, especially in Bengaluru, Pune and Hyderabad,” Colliers International’s South Asia Director, Office and Integrated Services George McKay said.

He noted Bengaluru continues to go from strength to strength in terms of office absorption.

“This is good news for owners and developers, but is a challenge for office occupiers in many cases, as they face the prospect of higher rental rates and fewer options to choose from at least in terms of ready supply.

“Land markets in the main cities have become quite active as established and next generation developers are looking to replenish their land banks, to satisfy both existing and new client demand,” he said.

As per Colliers, the growing office demand will outstrip supply in technology sector driven markets such as Pune, Bengaluru, and Hyderabad.

“This should therefore lead to downward pressure on vacancies and an upward pressure on gross office rents in these markets. In contrast, traditional commercial markets such as Mumbai and NCR are likely to remain stable in terms of rents and vacancy due to a stable demand and supply scenario,” McKay said.

According to Surabhi Arora, Senior Associate Director, Research at Colliers International, the improving economic picture provides a favorable background for continued expansion in commercial property markets.

“Nasscom predicted 10-12 per cent annual growth in IT and technology enabled services until 2020 that should help the office market to remain strong in 2017.

“That said, a further impetus to growth should be provided by other macro-economic factors such as declining oil prices and increasing monetary easing facilitated by ongoing moderation in inflation,” she added.

Source: Realty.Economictimes.Indiatimes.Com

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Office space demand sees sustained pickup across top cities

The demand for commercial real estate across the country is getting stronger and is witnessing a sustained momentum. The office space absorption across top 9 property markets has seen a sustained growth with total 28.3 million sq ft picked up during the first nine months of 2016, showed a Colliers International report.

Last year, commercial real estate in India registered a record absorption, and given the current momentum, this year is also headed in the same direction.

“The key office markets across India, especially in the south, continue to go from strength to strength in terms of office absorption, and with rents increasing significantly compared to prior years in certain micro markets. This is good news for owners and developers, but a challenge for office occupiers in many cases, as they face the prospect of higher rental rates and fewer options to choose from at least in terms of ready supply,” said George McKay, South Asia Director, Office & Integrated Services at Colliers International.

Colliers expects the leasing activity to pick up in the upcoming quarters and vacancies to decline in prime commercial corridors on the back of rising demand momentum, especially in Bengaluru, Pune and Hyderabad.

“Demand for commercial real estate has been increasing over the recent quarters as corporate entities consolidate and expand operations following a positive economic scenario. Demand for commercial real estate has been on the upswing across markets and we are experiencing it in our ongoing township projects in Panvel, Chennai and commercial tower in GIFT city near Ahmedabad,” said Niranjan Hiranandani, CMD, Hiranandani Communities.

“As I see it, business growth in India has been all about adopting global best practices, and I expect demand for commercial realty to keep growing through 2016 and 2017,” he said.

Expansion strategies by occupiers in ecommerce, healthcare and technology space are expected to increase in the overall occupancy levels. The growing office demand is expected to outstrip supply in technology sector driven markets such as Pune, Bengaluru, and Hyderabad. This should, therefore, lead to downward pressure on vacancies and an upward pressure on gross office rents in these markets, the report said. In contrast, traditional commercial markets such as Mumbai and NCR are likely to remain stable in terms of rents and vacancy due to a stable demand and supply scenario.

According to McKay of Colliers International, the demand for commercial spaces has resulted in land markets in the main cities becoming active as established and next generation developers are looking to replenish their land reserves to satisfy both existing and new client demand. During the first nine months of the year, occupier demand has focused on quality products in preferred micro markets in most of the cities, whereas startup and small-size companies showed an inclination towards serviced and co-working space.

Also, there has been an increased demand for leased out commercial assets in the market as indicated by a recent deal by Brookfield Asset Management to buy 4.5 million sq ft grade-A office and retail portfolio of Hiranandani Group in Mumbai’s Powai suburb for $1billion.

“We expect an increase in office demand beckoned by improving Business Confidence Index which showed a 5.7% increase during April-July 2016. Other factors such as controlled inflation, falling interest rates indicate strong economic fundamentals,” Colliers said.

Source: Economictimes.Indiatimes.Com

Office rentals in Delhi NCR remain static in H1; Gurgaon sees marginal rise

Average office rentals in Delhi-NCR have remained static at Rs 77 per sq ft per month in the first half of 2016, compared to the year-ago period, according to property consultancy JLL India.

Submarkets of Gurgaon and Noida, however, witnessed a marginal rise, with average year-on-year rents increasing 1% and 5%, respectively, to Rs 75 and Rs 43.

Office rentals in Gurgaon’s Cyber City is inching closer to triple digits. “The profile of tenants has changed in recent years. From being back offices with strict dependence on cost arbitrage, the tenant profile now includes consulting, high-tech engineering and design firms,” said Santhosh Kumar, chief executive officer, operations & international director, JLL India.

“Presence of non-IT companies in such traditional IT holdouts has also increased,” he added.

Delhi-NCR also had the highest vacancy rate of almost 32% in the June quarter this year, mainly due to inventory pile up at peripheral locations such as Manesar, Greater Noida and the extended parts of NH-8.

Bengaluru leads the way in vacancy rates, with only 3% of office space vacant as of the second quarter of 2016, followed by Pune and Hyderabad, with vacancy levels of 6% and 9%, respectively. Chennai comes next at around 12%, followed by Kolkata and Mumbai at around 19%, each.

In terms of having the most grade-A office stock, Gurgaon micro-market leads the way followed by Noida and SBD. Delhi city has limited grade-A supply, according to JLL.

Source: CredaiNCR.Org

India’s real estate sector is again emerging as key hub for investment

India’s real estate is back on the radar of global investors and institutions with the country emerging as the other significant investment option in the wake of China slowing down, said Henry Chin, head of research for Asia Pacific at property advisory firm CBRE.

“The Modi government has played the role of a very good catalyst and in the last 18 months, interest in India has been growing among occupiers and investors alike,” said Chin. He cited the example of large institutional investors such as Blackstone, Brookfield and JP Morgan who have a presence in India now and are investing large sums of money in the Indian real estate. Recently, Chinese developer Wanda group also evinced interest in developing large projects in the country, Chin said. While the residential real estate market in India has seen slow growth over the last many quarters, the last one year was particularly good for the office leasing segment in the country.

Chin said leasing activity has been good so far this year and will continue to be strong in the second half of 2016. “Last year, Bengaluru was the strongest among all Asia Pacific markets in terms of office space leasing, and demand for the city is continuing to grow,” he said.

The demand for office space, he said, is coming from the IT and BPO sectors as well as from banking, financial services and insurance (BFSI), pharma, engineering and automotive segments. There has been some contraction in office demand from the ecommerce of late but companies in that segment have taken up more logistics and warehousing space as businesses grow. “We are also noticing that a lot of projects in the industrial parks space that were shelved by builders for sometime now are coming back on track,” said Chin. According to him, global investors and institutions are also taking note of the changing regulations in India, especially those relating to real estate investment trusts (REITs).

“Most people are talking about Indian REITs. We think there are multiple factors for the success of REITs in any market. I think India is 50% there at the moment,” said Chin. “There are still a few things on the tax efficiency front and on the regulatory framework that need some work.”

India has around 200 million sq ft of REIT-able space available. Earlier this week, the Securities and Exchange Board of India (Sebi) proposed further relaxed norms for REITs, specifically on related party transactions, and also suggested allowing REITs to invest more money in under construction projects. If the proposal is accepted, REITs will be able to invest up to 20% in under-construction projects compared with 10% currently allowed.

Chin said the other piece of regulation that people are talking about is the Real Estate Regulatory Act (RERA), which, when implemented fully, is likely to help augment foreign capital flow into the Indian residential real estate segment.

Source: Economictimes.Indiatimes.Com

Office space take-up rises in Delhi-NCR

Commercial space leasing in Delhi NCR has increased because of large market deals.

The net absorption of office space saw a decline of 18% year-on-year (y-o-y) to be recorded at 14.5 million square feet (msf) across the top eight Indian cities. Activity level was impacted by a significant drop in absorption levels in cities of Chennai (-51%), Pune (-41%), Mumbai (-36%) and Bengaluru (-34%) in the first half of 2016 compared to same time last year, says a report.

The first half of the year was marked by unavailability of quality Grade A space in many cities, while other cities saw prevalence of small-sized deals, which together led to a decline in overall net absorption. In the same period Hyderabad saw a rise in net absorption of 55% year-on-year in the first half of 2016 while Delhi NCR (+39%), Ahmedabad (+27%) and Kolkata (+10%) also recorded a rise in net absorption of office space in the first half of the year, says a report by international consultant Cushman &Wakefield.

Delhi-NCR sees 39% Higher Net Absorption:

Delhi-NCR witnessed 2.4 million square feet of net absorption during the first half of 2016, a surge of 39% from the corresponding period last year. The increase in the overall activities was due to some large-sized deals taking place in the market. All the three zones of Gurgaon and Noida and New Delhi have witnessed activities during the period. However, Noida has seen an increased level of absorption in the second quarter as compared to previous periods. During May-June quarter, Noida accounted for 38% of total grade A net absorption in Delhi-NCR – which is the same proportion as Gurgaon.

Others sub-markets (Sohna Road, Golf Course Road, Udyog Vihar, NH8, Golf Course Extension Road, Dhundahera, excluding Manesar). The spurt in Noida’s net absorption was on the back of increased take-up of space by IT-ITeS companies. Typically, the Gurgaon sub-market has been seeing heightened activity over the last few quarters.

The overall supply levels during the first half of 2016 too witnessed a drop of 7% with Bengaluru, Chennai, Delhi-NCR and Pune witnessing a slowdown in project completion.

“The first half of the year has been a mixed bag for the key markets with large volume locations like Bengaluru and Mumbai seeing a drop in net absorption owing to slower take up of space by IT/ITeS and BFSI sectors. This, however, is going to be only temporary as the second half looks promising. A large number of companies have committed space foreseeing limited availability of upcoming quality stock in select markets which will push up absorption in the second half of the year. These pre-commitments are bound to steer net absorption, going forward. The year began with some outright transactions that would continue in some markets,” says Anshul Jain, managing director, India, Cushman & Wakefield.

“India’s economic growth story remains strong with additional fillip coming in from the government in the form of relaxation of FDI in a number of sectors. There are a few impending changes that will be taking place on the global canvas including the US presidential election and exit of Britain from the European Union, but India’s position will remain strong and favorable backed by the strong GDP growth sustained over the last 18 months. All this will help the office space market remain positive for the year of 2016 with absorption levels remaining positive for the rest of the year, albeit some markets that are oversupplied may still experience high vacancy,” he says.

Absorption up by 55% in Hyderabad:

Improving business climate and the Telangana government’s efforts to create more visibility for Brand Hyderabad led to the city witnessing a steep rise in net absorption in the first half of 2016 to 2.9 msf, a 55% increase from corresponding period last year.

As the city continues to witness strong demand for space from IT-ITeS and technology companies, net absorption during April-June period stood at roughly 1.7 msf, of which 70% came in the form of previously recorded pre-commitments by IT-ITeS companies. Competitive rentals in the city, quality infrastructure and a proactive government have been attracting global companies to increasingly prefer to set up offices in the city.

Source: Hindustan Times(Estates), July 30, 2016, Page 07