India’s office leasing crosses 20 million sq ft in the first half of 2018: Report

India’s office leasing crosses 20 million sq ft in the first half of 2018: Report

July 18, 2018 in Investment News, Leasing News

Office leasing activity across India’s top 9 markets rose more than 10%, with the total leasing of over 20 million sq ft during the first half of 2018. Bangalore along with Delhi-NCR, Hyderabad and Mumbai led the leasing activity with 80% share, showed data from CBRE South Asia.

Continuing the trend, office space take-up was dominated by small- and medium-sized transactions. Small-sized transactions with less than 10,000 sq ft space accounted for around 44% of the transaction activity, while mid-sized transactions ranging between 10,000 sq ft and 50,000 sq ft held a 42% share. The share of large-sized deals with over 100,000 sq ft also rose marginally from 4% in the previous quarter to about 5%.

“Corporates are likely to remain cost-sensitive, develop workplace strategies for efficient space utilization, which will impact the office space absorption. We foresee pre-commitments in quality, cost-effective projects nearing completion which will have a significant impact on office leasing activity across key cities,” said Anshuman Magazine, Chairman, India and South East Asia, CBRE.

Occupiers continued to future-proof their portfolios and hedge against future rental escalations by pre-leasing space across various cities. Pre-leasing activity rose significantly in the second quarter largely in Delhi-NCR, Hyderabad and Pune drove primarily by Banking, Financial Services and Insurance (BFSI), research, consulting and analytics.

Around 17 million sq ft office space supply was added during the period and this was the increase of over 50% compared with the first half of 2017. Four cities including Bangalore, Mumbai, Hyderabad and Delhi-NCR accounted for more than 80% of this supply addition, followed by Chennai.

Sustained occupiers’ interest resulted in rental values rising in the range of 1%-7% across micro-markets in Bangalore, Chennai and Pune.

“Office leasing activity is expected to remain stable in the short term, backed by corporates looking to expand or consolidate their operations. Across all cities, rising traffic congestion and public infrastructure have become key decision-making parameters significantly impacting location strategies of occupiers,” said Ram Chandnani, Managing Director, Advisory & Transaction Services, India, CBRE South Asia.

He expects infrastructure initiatives such as completion of highways and introduction of Mass Rapid Transport System (MRTS) services among others to significantly influence and drive occupier preferences in the coming quarters.

According to experts, the direct impact of Goods & Services Tax on the office sector remains limited, despite an increase in occupier outgo as the rate now stands at 18% compared with the previous 15% service tax. Going forward, they expect this tax rate increase to have a negligible impact on leasing momentum. Prominent sectors such as BFSI, engineering & manufacturing, research & consulting and co-working are likely to account for a larger share in leasing activity on a yearly basis.



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