Notwithstanding the macroeconomic disruptions, the commercial real estate (CRE) market remained robust in 2017. The year 2017 witnessed a pan-India leasing volume of approximately 42.8 million sq ft (3.9 million sq metres), excluding renewals and pre-commitments, which is marginally up from the absorption level in 2016 (approximately 41.6 million sq ft), says a report titled ‘India Office Property Market Overview, Trends to watch for in 2018’ by Colliers International.
Bengaluru remained the frontrunner in office leasing, witnessing a record-breaking leasing of more than 15 million sq ft (1.4 million sq metres), accounting for 36 per cent of the market share, followed by NCR (18 per cent), Mumbai (13 per cent), Chennai (11 per cent), Hyderabad (10 per cent), Pune (eight per cent) and Kolkata (two per cene). The demand for Grade ‘A’ office space was primarily driven by technology companies, followed by engineering, manufacturing, banking and finance and co-working operators.
“The trend of pre-committing large spaces had picked up in 2017, with more than four million sq ft (0.3 million sq metres) of office space pre-committed in 2017, in under-construction projects. Furthermore, co-working or flexible working spaces, have made their entry into the market in a big way, representing about 11 per cent of total absorption in 2017, compared to 2016’s share of three per cent,” says Ritesh Sachdev, senior executive director, occupier services, Colliers International India.
Trends that will dominate the market in 2018
- Flexibility to remain a key focus, in work space strategies: One of the biggest shifts in workplace strategies in India, is likely to be the improvement in offering flexibility to occupiers, by developers. Coworks, supported by RMZ Developers, has rolled out flexible workspace in their portfolio and opened several co-working spaces in their own buildings, by investing in modern technologies across India. Developers such as DLF, Vatika, Supertech and Ascendas, are also exploring this new emerging workplace model. Thus, we expect flexible office spaces to flourish in the coming years, given its convenience and cost-effectiveness. In the past two years, flexible office operators leased more than 4.6 million sq ft (0.4 million sq metres).
- Pre-commitments and BTS to remain in trend: With single digit vacancies in the main IT-ITeS locations, such as Bengaluru, Hyderabad, Pune and Chennai, occupiers continued to pre-commit large office spaces. We expect the trend of high pre-commitment rate in large office spaces and SEZs, to continue in the upcoming years.
- Occupiers to explore tier-2 and tier-3 cities for back-office requirements: Many technology and e-commerce companies are exploring expansion in tier-2 and tier-3 cities, due to cheaper resources and rising cost of power. Given the government’s push for smart cities’ development, we believe that firms should consider expanding in the cities, where the state governments intend to spur growth by offering more fiscal and non-fiscal incentives and building infrastructure projects, such as airports and railways.
“One of the biggest shifts in workplace strategies in India, is likely to be the improvement in the degree of flexibility offered to occupiers by the developers. We expect these large players to compete against traditional offices to target major corporates, besides focusing on small and medium enterprises. Landlords should recognise the benefits of flexible workspaces and redesign their offices across their portfolios. They should look to offer quality and more efficient office spaces, through subdividing floors into multiple office suites. The strategy should be to redesign existing spaces, to create collaborative workspaces that meet the needs of smaller tenants, from which we are currently witnessing strong demand,” says Surabhi Arora, senior associate director, research, Colliers International India.