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

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

NCR leads in corporate realty domain

Takes up 31% of total transacted space in the leading cities, followed by Mumbai.

Approximately 5 million sq ft of prime office space was absorbed during the first quarter of this year – a drop of approximately 26% year-on-year, according to CBRE’s India Office Market View – Q1, 2016 report.

Following a particularly strong fourth quarter of 2015, the first quarter of 2016 was comparatively sluggish as most corporate space occupiers were still strategising their real estate plans for the year, with limited transaction decisions being implemented in the first quarter.

According to the report, corporate real estate space take-up during the quarter was led by Delhi National Capital Region (NCR) with a share of 31% of total transacted space in the leading cities, followed by Mumbai (23%) and Bengaluru (17%).

Corporate occupier interest remained concentrated towards prominent micro-markets such as Gurgaon in Delhi NCR; Thane, Navi Mumbai, Vikhroli, Goregaon and Andheri in Mumbai; Koramangla, Whitefield and Electronic City in Bengaluru; IT Corridor in Hyderabad; and Viman Nagar in Pune. Occupiers were also seen pre-committing space in under-construction developments, primarily in Mumbai and Gurgaon, largely led by the lack of available space in investment-grade developments at prime locations.

Commenting on the findings of the report, Anshuman Magazine, chairman and managing director of CBRE, South Asia Pvt. Ltd. says, “While the first quarter of the year traditionally witnesses muted transaction activity, the overall sentiment among India’s corporate space occupiers is optimistic. Besides, India continues to remain one of the global key outsourcing destinations which will improve the momentum going forward.”

Almost 47% of the leasing activity in the quarter was concentrated in IT developments. Leading SEZ properties in Gurgaon, Noida, Bengaluru, and Chennai also witnessed considerable traction, accounting for about 14% of total transaction activity.

Most SEZ transactions were the culmination of pre-commitments made by corporate occupiers in previous quarters for their office requirements.

In terms of supply, approximately 7 million sq ft of new office space was completed in the quarter.

Source: Hindustan Times (Estates), Apr 16, 2016, Page 05