Commercial Space Absorption Goes up by 28%: CBRE India

By : 360 Realtors

04 October, 2017

 As per the recent reports by CBRE India, owing to continuous expansion by the corporates, there has been a rise of 28% in the absorption of commercial space leasing during the quarter April-June 2017 across 8 major cities of the country, touching a mark of 10 million sq. ft. The leasing activity performed very well during the second quarter mainly due to the reason that the corporates, in order to explore against any rental escalations, were pre-leasing office spaces and future-proofing their portfolios. The first quarter of 2017 had office space absorption of approximately 8 million sq. ft. 

The major 8 cities taken into account are Mumbai, Delhi-NCR, Bengaluru, Hyderabad, Chennai, Pune, Kolkata, and Kochi. While Delhi-NCR and Bengaluru remained the key demand drivers, there was significant activity witnessed in Hyderabad too, leaving behind Mumbai. However, in comparison to the year-ago period, this absorption is down by 4%.

The leasing of commercial spaces during the first half of the year 2017 was slightly higher by 2 %, touching 18 million sq. ft. as compared to same time frame last year. Thus, there remains a constant hustle and bustle in the commercial realty spaces in the country. Due to the successful implementation of the regulatory reforms like RERA (Real Estate Regulation & Development Act) and GST, the country’s economic fundamentals continued to remain very strong. The increasing prominence of smaller cities for establishing corporate offices, infrastructural developments taking place across major cities, and the overall positive sentiment are acting as catalysts in fueling the demand for office market and have witnessed a positive momentum since the last two years. The demand for these spaces is mainly driven by IT/ITES firms, capturing a share of 36%, followed by BFSI (20%) and engineering and manufacturing (19%) respectively. The leasing scenario continues to be dominated by medium and small-sized transactions (below 10,000 sq. ft.) comprising 44% of the total transactions happening. Approximately 46% of the deals varied between 10,000-50,000 sq. ft.

There was a dip of almost 1 % in the large-sized transactions (over 1 lakh sq. ft.) taking place. The major large-scale deals in space consumption were done by top companies like Microsoft, Cognizant, Qualcomm, and Wells Fargo. Most of the corporates, besides consolidating/ expanding efforts, also paid emphasis on achieving flexibility on the whole.

Talking about the office space supply over the period of January-March in 2017, it almost doubled, reaching a mark of 8.2 million sq. ft. Places like Hyderabad and Bengaluru accounted for a major supply addition of over 60% followed by Mumbai and Pune. 

In the quarter April-June 2017, while cities like Chennai, Kochi, Mumbai, and Kolkata witnessed stable rentals, the rental growth was restricted to places like Delhi-NCR.