With the sentiment among corporates across the country improving, net absorption of office space in India expected to be about 31 million sq ft by the end of 2015, according to a joint study by industry body Assocham and property advisory firm JLL.
“A total of about 34 million sq ft of office space is expected to become operational in 2015 and India’s office stock is likely to settle at 440 million sq ft by end-2015,” noted the study, which is titled ‘Housing for All: Catalyst for development & inclusive growth’.
DS Rawat, secretary general of Assocham said: “With a pro-business government at the centre, the office sector is expected to see a lot more traction and various multi-national (MNC) occupiers and investors entering the country.”
The study said that year 2015 will provide a window of opportunity for occupiers and investors as rents and capital values in most micro-markets are at their cyclical bottom.
“Select micro-markets of cities still offer attractive rents as compared to its peak while several of them have already shown signs of revival due to strengthening demand for office space,” it said.
According to the study, vacancy rates are likely to be in the range of 15-18% by end-2015
Amid tier-I cities, National Capital Region (NCR), Mumbai and Bengaluru are likely to witness big ticket transactions along with substantial number of leasing transactions in operational and under-construction projects. Among tier-II cities, Pune is expected to see healthy demand in the medium term as few quality information technology (IT) special economic zones (SEZs) are in an advanced stage of construction with strong pre-commitments.
Delhi-NCR is showing a forecast supply of 10 million sq ft at the end of 2015 while Mumbai and Bangalore are expected to inject about six million sq ft and about eight million sq ft respectively of new office spaces.
Against this supply, Delhi-NCR, Mumbai and Bengaluru are forecast to record net absorption of 6.1 million sq ft, seven million sq ft and 7.6 million sq ft respectively by end-2015.
Mumbai is expected to lead the country in terms of total operational Grade-A office stock of 100 million sq ft by the end of this year followed by Bengaluru (92.6 million sq ft). Amid tier-II cities, Pune is expected to lead the market in constructing new office spaces adding around 44.7 million sq ft of office space. “Strong demand from IT occupiers for relatively larger spaces is helping Bengaluru to build more, which will gradually narrow down the gap in operational stock of both these cities,” the report said.
The ASSOCHAM-JLL study also forecasted that the 12-15 malls being under construction and expected to be operational by end-2015 at pan-India level will add about 6.7 million sq ft of new organised retail space.
In terms of vacancy rate in organised retail space, it is forecasted to be highest in Delhi-NCR at 24% followed by Mumbai and Pune both at 20% while the lowest vacancy rate is likely to be seen in Kolkata followed by Chennai, Bangalore and Hyderabad.