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Office space absorption drops 26% in Q1: CBRE

06 April, 2016

The first quarter of 2016 has started on a slow note with office space absorption dropping by 26 per cent year on year as corporates are still putting together plans for the rest of the year, according to a report by real estate research agency CBRE.

According to the report, five million sq ft of prime office space was absorbed during Q1 2016 (January-March), a drop of approximately 26 per cent year on year. Corporate real estate space take-up during the quarter was led by Delhi-National Capital Region (NCR) with a share of 31 per cent of total transacted space in leading cities, followed by Mumbai (23 per cent) and Bangalore (17 per cent).

Corporate occupier interest remained concentrated towards prominent micro-markets such as Gurgaon in Delhi NCR; Thane, Navi Mumbai, Vikhroli, Goregaon and Andheri in Mumbai; Koramangala, Whitefield and Electronics City in Bangalore; 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.

Anshuman Magazine, chairman and managing director, CBRE, South Asia, said, “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 per cent of the leasing activity in the quarter was concentrated in IT developments. Leading SEZ properties in Chennai, Bangalore, Gurgaon and Noida also witnessed considerable traction, accounting for about 14 per cent 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 with smaller cities such as Kolkata, Hyderabad and Pune accounting for about 68 per cent of the total supply released during the quarter. Pune led project completions, generating about 25 per cent of the total supply released during the quarter across leading cities. Commercial (non-IT) projects accounted for about half of the overall supply that came on-stream in Q1 2016.

“Industry sectors such as IT/ITeS and banking/financial services are likely to remain the dominant demand drivers for office space in the country, with manufacturing/engineering, e-commerce and pharmaceuticals being the other active sectors that are likely to generate demand for corporate real estate space,” said Ram Chandnani, managing director – transactions services, CBRE South Asia.

“Occupiers are also likely to keep a strong check on space utilisation ratios and innovate on their workplace strategies. Demand for SEZ space and pre-commitments in projects nearing completion are expected to continue to improve in the coming months,” he said.

Increased occupier demand in quality IT and IT SEZ projects in Malad/Goregaon in Mumbai; DLF Cybercity in Gurgaon; Noida Expressway in Noida; Guindy, Velachery, Perungudi, Mount Poonamallee Road and Taramani in Chennai; Aundh Baner, Viman Nagar, Hinjewadi and Kharadi in Pune; and IT and Extended IT Corridors in Hyderabad, resulted in a quarter-on-quarter rental appreciation of 2–10 per cent across these micro-markets.


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Office space absorption drops 26% in Q1: CBRE

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