Commercial space leasing rises 18% to 38 million sft in 2015: CBRE

From ET Realty

NEW DELHI: Office space leasing in 2015 was the highest ever in India’s top seven cities at 38 million sq ft, indicating an overall improvement in sentiment among domestic as well as foreign corporates, according to property advisory firm CBRE. This is an 18% rise over 2014.

Absorption Grade-A office space across key cities in India witnessed a quarterly growth of approximately 26% during the October-December 2015 period. The quarter witnessed leasing of 12 million sq ft of office space.

According to the CBRE report, the annual office demand in 2015 was led by Bangalore with 32% share of the total absorption followed by the Delhi National Capital Region (NCR) with a 23% share.

“Suburban and peripheral office districts of major cities attracted steady occupier demand in Q4 2015. Prominent micro-markets included Gurgaon in Delhi NCR; Powai, Vikhroli, Kanjurmarg and Thane/Navi Mumbai in Mumbai; the Outer Ring Road (ORR) in Bangalore; the IT Corridor in Hyderabad; the Old Mahabalipuram Road stretch along Perungudi in Chennai; Viman Nagar in Pune; and Salt Lake Sector V in Kolkata,” the report said.

“India is an established outsourcing destination for various multinationals, who continue to outsource their operations to major cities in India; a key reason for a sustained spurt in office transaction activity. This coupled with a steady macro-economic climate and an overall positive market sentiment during the year, encouraged corporate office occupier demand in 2015,” said Anshuman Magazine, chairman and managing director of CBRE, South Asia.

About 56% of the space was leased by IT/ITeS firms across the seven top cities while other sectors such as banking & financial services, engineering & manufacturing, e-Commerce and research & consulting also saw significant traction, collectively contributing about 29% to the total leased space in 2015.

The year also saw significant fresh supply of office space. In 2015, completion of new office developments rose to a five year high of around 45% compared to the last year.

“These development completions were led by Bangalore, followed by Delhi NCR, Hyderabad and Mumbai. The fourth quarter, in particular, saw new supply addition of more than 11 million sq ft. Most of the supply in Q4 2015 came up in Gurgaon and Noida in Delhi NCR; ORR and Sarjapur Road in Bangalore; IT and Extended IT Corridors in Hyderabad; Baner and Hinjewadi in Pune; and Andheri (East) in Mumbai,” the report said.

“Corporate occupier demand for office space is expected to continue to grow in the forthcoming months,” said Ram Chandnani, managing director – transactions services, CBRE South Asia.

“Expansion and consolidation strategies of corporate firms will continue to be in Greenfield projects and pre-committed space in under construction projects. Occupiers will evaluate their office space requirements on the basis of infrastructure development and cost effective investment-grade office space,” he explained.

CBRE said that rental values remained largely stable across most micro-markets in the October-December quarter of 2015.

“Demand for newly completed properties, however, led to rental growth in select peripheral micro-markets. A marginal rental appreciation of around 1-5% q-o-q was reported at ORR in Bangalore; DLF Cybercity in Gurgaon; Guindy, Vadapalani and Mayor Ramnathan Chettiar Nagar in Chennai; and the IT and Extended IT Corridors in Hyderabad. Rentals were stable for the most part in the Central Business Districts of most leading cities, barring Bangalore and Pune,” it said.

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