According to property consultancy JLL India, the banking, financial services and insurance (BFSI) sector is active in office space leasing across top cities, with its share increasing from around 7% in 2012 to above 13% in the first half of 2015.
“This increase continues to ride on the back of a rising number of BFSI transactions in Bangalore and the National Capital Region (NCR), where office demand has been IT/ ITeS-dominated,” said Ashutosh Limaye, National Director – Research, JLL India. Similarly, in tier-II cities too, Hyderabad is witnessing a good number of lease transactions, followed by Kolkata.
The volume of leasing by the BFSI companies has also increased during the past two to three years, with the average lease deal sizes ranging between 5,000 sq ft and 15,000 sq ft in cities like Mumbai, NCR and Pune. While the number of smaller lease deal sizes seen in NCR has increased, bigger lease deal sizes – ranging from 20,000 to 30,000 sq ft – are seen in Bangalore.
The report also reveals a shift in location preference by BFSI players from central business districts to secondary business districts (SBDs) of major cities. The total area leased in Mumbai’s CBD reduced substantially low from 154,320 sq ft in 2012 to 13,500 sq ft in H1 2015, while Delhi’s CBD also witnessed a similar trend wherein the total area leased decreased from 119,037 sq ft in 2013 to 25,510 sq ft in H1 2015.
Bigger lease deal sizes by BFSI players are being seen in the secondary business districts (SBDs). “While the larger areas leased in the SBDs are meant to serve mostly as back-offices, the front-offices too could shift to SBDs in a few years,” said Limaye. This has been possible due to advance in technologies in Banking arena such as RTGS, NEFT, Core Banking systems and Cheque truncation, whereby physical presence of a branch in the CBD is no longer necessary.
While rents will remain under pressure in CBD spaces leased by BFSI players in most Indian cities, the rental outlook looks bright for BFSI-leased spaces in key SBD and suburban markets such as Lower Parel and BKC in Mumbai, prime Gurgaon in NCR and Kharadi, Hadapsar in Pune. “However, property prices will continue to grow in this segment because of constrained future supply in key BFSI markets,” he added.
A negative absorption is forecasted in Mumbai CBD for 2015 as some select occupiers are planning to move out. In contrast, Delhi CBD will continue to see reasonably good activity in terms of churn and commitment. “Vacancy of around 15% in Delhi CBD ensures that there is always some activity here,” Limaye said.