Nearly 9.6 million sq ft of Grade A office space was absorbed, during the July-September quarter of this year, according to a report by property consultant Colliers International.
As per the survey, southern cities dominated the office absorption pie.
- Bengaluru: 25%
- Hyderabad: 20%
- Chennai: 11%
- Gurugram: 13%
- Mumbai and Noida: 10%
- Pune: 8%
- Delhi: 2%
- Kolkata: 1%
“Although Q3 2016 marked a quarter-on-quarter decrease of 7.6% in gross leasing volume, we expect leasing activity to pick up in the upcoming quarters,” it added. “Vacancies are set to decline in prime commercial corridors on the back of rising demand momentum, especially in Bengaluru, Pune and Hyderabad,” Colliers International’s south Asia director, office and integrated services, George McKay said.
On Bengaluru’s strong office absorption, he said, “This is good news for owners and developers but is a challenge for office occupiers in many cases, as they face the prospect of higher rental rates and fewer options to choose from – at least in terms of ready supply. Land markets in the main cities have become quite active, as established and next generation developers are looking to replenish their land banks, to satisfy the demand from existing and new clients.”
As per Colliers, the growing office demand will outstrip supply, in technology sector-driven markets, such as Pune, Bengaluru and Hyderabad. “This should, therefore, lead to downward pressure on vacancies and an upward pressure on gross office rents in these markets. In contrast, traditional commercial markets, such as Mumbai and NCR, are likely to remain stable in terms of rents and vacancy, due to a stable demand and supply scenario,” McKay said.
According to Surabhi Arora, senior associate director, research, at Colliers International, the improving economic picture provides a favourable background for continued expansion in commercial property markets. “Nasscom predicted 10%-12% annual growth in IT and technology-enabled services, until 2020 that should help the office market to remain strong in 2017. That said, a further impetus to growth should be provided by other macro-economic factors, such as declining oil prices and increasing monetary easing, facilitated by ongoing moderation in inflation,” she added.