With sustained interest from occupiers led by the technology sector, commercial leasing activity across India has crossed 32 million sq ft, up 7% from a year ago, across India’s top 8 property markets in the first three quarters of 2018.
Office space absorption during the September quarter rose 3% from a year ago and 12% sequentially to 10.9 million sq.ft.with Mumbai, Bengaluru, Hyderabad and NCR accounting for almost 80% of the leasing activity, said showed data from property consultant CBRE South Asia.
Occupiers from the technology sector, with a share of 48% of total leasing, drove office space take-up in the country during the third quarter. Occupiers from the engineering and manufacturing sector with 14% share were followed by co-working and business centre operators that absorbed 11% of the total leased space.
“India’s economic growth continued on its upward trajectory and real estate services along with financial and professional services sector contributed to this economic surge as it grew from 5% in the previous quarter to 6.5% during the review period. Sectors such as BFSI, engineering & manufacturing, and agile/ co-working/business centres are likely to account for a larger share in leasing activity going forward,” said Anshuman Magazine, Chairman, India and South East Asia, CBRE.
Interestingly, India had witnessed 42 million sq.ft.office space absorption in 2017, while the first nine months of 2017 had seen absorption of 30.1 million sq ft. Even as several mid-to-large-sized deals were reported in Bangalore, Hyderabad, Pune and Gurgaon, more than 30% of the transaction activity was reported in SEZ space.
Similar to the previous quarters, office space take-up was dominated by small- and medium-sized transactions. Mid-sized transactions ranging between 10,000 sq.ft.and 50,000 sq.ft.accounted for around 45% of the transaction activity, while small-sized transactions less than 10,000 sq.ft.had a 42% share.
The share of large-sized deals with over 1 lakh sq.ft. size increased to 7% during the quarter. The agile workspace sector continued to witness a strong growth momentum, with global and Indian majors expanding their footprint in tier 1 and tier 2 cities. Co-working and business operators leased about 3.3 million sq.ft.space in the first three quarters of the year, almost doubling their take-up reported in the first three quarters of 2017. Other sectors such as Banking, Financial Services and Insurance (BFSI) with 7% share also contributed to the increase in leasing activity.
“The trend of agile spaces is rising during a booming start-up era, even as corporate are drawing up fluid expansion and occupation plans. Occupiers are also expected to keep strong checks on space utilization ratios and innovation in workplace strategies while expanding their footprint and implementing their expansion plans. Also, SEZs are expected to account for a larger share of the upcoming supply over the next few quarters. Given the approaching sunset date, we anticipate an increase in demand for SEZ s space,” said Ram Chandnani, Managing Director, Advisory & Transaction Services, India, CBRE South Asia.
Pre-leasing activity rose in during the quarter, largely in Bangalore and Hyderabad, driven primarily by tech and BFSI corporates. Overall, the country witnessed more than 12 million sq.ft.of pre-commitment transactions in mostly under construction assets in the first three quarters of the year, the report said.
On the other hand, supply addition during the quarter dipped marginally by 1% from a year ago to 7.1 million sq ft. Bangalore and Kochi accounted for 60% of the quarterly supply addition, followed by Mumbai and Hyderabad. Except for Pune, Kolkata and Kochi, all cities reported a dip in development completions on a quarterly basis. Slippages were reported in cities such as NCR, Mumbai and Hyderabad.