Office market to stay
strong despite falling growth numbers:
Colliers report
The policy changes that the government is implementing, should help
improve business confidence in India and result in robust office leasing demand in the coming years. Occupiers looking for large, quality
spaces, should consider R
The policy changes that the government is implementing, should help
improve business confidence in India and result in robust office leasing
demand in the coming years.
Occupiers looking for large, quality spaces, should consider making
pre-commitments in new office buildings, especially in the
technology-driven markets like Bengaluru, Hyderabad and Pune, according
to a report by Colliers International ‘India Office Property Market
Overview, Trends to watch for in 2017’.
Bengaluru remained on a high growth trajectory and maintained its
leading status among the key cities, by retaining a 31% share of the
total occupier demand, followed by Delhi-NCR (18%.) Hyderabad and
Chennai stood on 13% each, while Mumbai, Pune and Kolkata accounted for
14%, 9% and 2%, respectively, of the overall leasing volume.
In 2016, 27.2 million sq ft (2.53 million sq metres) of grade A new
supply was released into the market. This was insufficient to cope with
the very strong demand, especially in markets such as Bengaluru,
Hyderabad, and Pune and resulted in a significant fall in vacancy levels
and an increase in office rents in most of the micro-markets in these
cities.
“In the technology-driven markets such as Hyderabad, Bengaluru and Pune,
the demand-supply gap is likely to remain a concern in the short term.
Tenant appetite for higher quality offices has been reflected in new
leases being executed at above market rates, in select grade A buildings
in all the cities. Expecting a similar trend in 2017 as well, we cannot
rule out the possibility of upward pressure on rents, at least in the
first half of the year in most of the preferred markets for grade A
buildings,” said Surabhi Arora, senior associate director, research, at
Colliers International.
Bengaluru In 2016 Bengaluru accounted for the highest percentage of
overall India leasing volume in the office space, recording 12.8 million
sq ft (1,188,300 sq meters) gross absorption. This was the highest leasing across the top nine Indian cities.
IT/ITeS companies were on an expansion spree and vigorous leasing is
expected to continue in 2017.
Despite significant supply pipeline, low vacancy in select
micro-markets, should exert upward pressure on rents.
Hyderabad For Hyderabad, demand outpaced supply in 2016. In terms of
occupier demand, 2016 was a record year for Hyderabad, with the highest
leasing volume since 2011. Recording a 37% year-on-year increase in
gross leasing, nearly 5.6 million sq ft (521,250 sq meters) was leased
in the city, outstripping the new supply addition of about 2.3 million
sq ft (216,900 sq meters).
Hyderabad’s office market is in transition and property owners have
aggressively increased rents in 2016, as available office space diminished with massive expansion by IT occupiers. In the short term,
supply should complement demand
In fact,
closure of a few large transactions in Q4 2016, helped Chennai to
achieve a gross absorption level of 4% above that of 2015.
Peripheral micro-markets should continue to gain occupier preference, as
most of the new supply is concentrated in this belt, mainly comprising
Old Mahabalipuram Road (OMR).
Kolkata Rents remained stable, as occupier-favourable conditions
persisted. Leasing activity was relatively subdued during the year, as
only 0.9 million sq ft (79,896 sq metres) of gross absorption was
recorded, marking a 13% decline from 2015 levels. Most of the deals were
small, with an average size of 8,000 sq ft (743 sq metres).
Amid high vacancy and affordable rents in Sector V and the peripheral
districts of Rajarhat and New Town, occupiers will probably continue to
opt for grade A office space in these micro-markets, for expansion and upgradation.
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