Office space absorption increased by 46%, to over 10.2 million sq ft in the second quarter of 2016 on improved demand from corporates, according to property consultant CBRE.
The National Capital Region (Delhi, Gurgaon and Noida) and Bengaluru, accounted for almost 50% of the total space take-up in the April-June quarter.
“Despite a muted global economy, India continues to be a favoured outsourcing destination for corporate firms. Recent policy announcements by the government and a stable domestic economy, are expected to attract investments into the country’s real estate sector and improve the ease of doing business,” said CBRE south Asia chairman and MD, Anshuman Magazine.
The IT/ITeS sector continued to be the largest demand driver for office space, accounting for over 50% of the total leasing activity in the quarter, followed by engineering and manufacturing firms and banking and financial services sector, CBRE stated in a report. It noted that nearly 7 million sq ft of fresh office space came into the market during this period.
Hyderabad and Mumbai accounted for more than 65% of the total supply of fresh office space across leading cities.
Mumbai witnessed a 21% rise in office space absorption with 1.4 million sq ft absorbed during the second quarter of 2016. The demand for office space was largely concentrated across peripheral micro-markets.
The city had over 2 million sq ft of new office space entering the market during the quarter.
Majority of office space demand in the city was led by corporate occupiers from the banking, financial services and insurance (BFSI) sector, followed by the pharmaceutical and engineering sectors.
More than 17 million sq ft of corporate real estate was absorbed across the leading cities in the first half of 2016.
Suburban and peripheral office districts of major cities attracted steady occupier demand during the quarter and the micro-markets that dominated leasing activity across cities during the quarter were: Whitefield and Electronic City in Bangalore; Sohna Road and DLF Cyber City in Gurgaon; CBD (Anna Salai, T Nagar, RK Salai, Alwarpet and Nungambakkam), OMR Zone 1 and Mount Ponnamalle Road in Chennai; the IT corridor in Hyderabad, Thane and Navi Mumbai, the report said.
The central business districts (CBDs) of several cities witnessed a change in rental values, with the exception of Delhi-NCR, Mumbai and Hyderabad.
In the case of Bangalore, Chennai and Pune, the CBD rental values increased by about 2%-6% quarter-on-quarter due to sustained demand levels, while Kolkata’s CBD witnessed a 4%-6% quarter-on-quarter rise in rentals.
With limited SEZ supply expected in the market, the segment witnessed 2%-12% quarter-on-quarter increase in rents across Chennai, Pune, Hyderabad and Kolkata.