Absorption of office space has sustained its momentum with the third quarter of 2015 witnessing a growth of 20 per cent year on year and 6 per cent quarter on quarter. The quarter saw absorption of more than 9 million sq ft of commercial space across top seven realty markets on the back of a sustained improvement in market sentiments, according to CBRE's India Office MarketView for Q3 2015.
Anshuman Magazine, chairman and managing director, CBRE, South Asia Pvt Ltd, said, “Industry sectors such as IT/ITeS and banking/financial services are likely to remain the major demand drivers for office space in leading cities during the 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.”
CBRE’s India Office MarketView reports on the status of Grade-A office space across the country’s leading cities.
The strong absorption was led by corporate firms in the IT/ITeS sector (nearly 50 per cent), followed by the banking/financial services sector and e-commerce companies. After seeing a robust share of 14 per cent in Q2 2015, e-commerce saw a drop in transactions with a share of just about 4 per cent in Q3 2015.
In terms of geographies, Delhi-NCR emerged as the top destination for corporate offices, attracting 31 per cent of the total transacted space. Gurgaon remained the most preferred destination for corporate occupiers in the region. This was followed by Bangalore with a share of 22 per cent of the total transacted space in the quarter and Chennai with a share of 17 per cent. Other markets like Mumbai, Pune and Hyderabad also saw healthy enquiries but space absorption remained low, the agency said.
The third quarter saw supply of more than 10 million sq ft of fresh investment-grade office space across key cities, leading to a quarter-on-quarter rise of around 21 per cent and a year-on-year increase of 44 per cent.
Bangalore saw the highest supply of space during the quarter.
Overall office space supply addition in Q3 2015 was the highest over the previous nine quarters, the report said.
“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, CBRE South Asia Pvt Ltd.
The rental space remained largely stable in the Central Business Districts (CBDs) in most of the top realty markets. Sustained momentum in absorption has led to a quarter-on-quarter rise of 2–7 per cent in prominent IT and SEZ developments of Gurgaon; Guindy, Mount Poonamallee Road and Ambattur in Chennai; IT corridor in Hyderabad; and of Aundh, Hinjewadi, Kharadi and Baner in Pune.
Bangalore has also seen a steady quarter-on-quarter rental appreciation of around 2–6 per cent across office locations. Rental values of office space in Mumbai and Kolkata remained stable.