Office space leasing touches a record high, at 46.8 million sq ft in 2018: Report

2018 has emerged as the best year for the office segment in Indian real estate, with leasing touching a record high of 46.8 million sq ft, led by Bengaluru, says a report by Knight Frank India

2018 was the best performing year, historically, for the commercial office segment, with leasing crossing 46 million sq ft, according to a report by Knight Frank India, titled ‘India Real Estate – Residential and Office, July-December 2018’. The 10th edition of this half-yearly report presented a comprehensive analysis of the commercial real estate market performance across the top seven cities (National Capital Region (NCR), Mumbai, Bengaluru, Hyderabad, Chennai, Ahmedabad and Pune) for the period July-December 2018 (H2 2018).

The Indian office space market achieved record transaction levels in H2 2018, as well as for the full year, 2018. Growing by 12 per cent y-o-y, both, full year 2018 and H2 2018, saw the highest transaction volumes (46.8 million sq ft and 25.2 million sq ft, respectively) achieved in this decade. The 46.8 million sq ft transacted during 2018 was in fact, the highest space transacted ever in the Indian office space market for any single year.


Commercial market highlights for the top seven cities

  • Bengaluru continued to lead the office space market, recording the highest leasing volumes at 13.4 million sq ft. Office space supply in the city was recorded at 7.6 million sq ft in full year 2018.
  • Hyderabad saw the highest percentage increase in space transacted y-o-y in H2 2018, at 30 per cent.
  • Except for Ahmedabad (-29%) and Chennai (-23%), leasing activities saw a positive growth in full year 2018, compared to 2017.
  • Pune recorded the highest percentage growth at 46 per cent y-o-y in 2018, but the significant jump in leasing volumes was in Hyderabad which, while recording a yearly increase of 24 per cent in 2018, saw leasing worth seven million sq ft. This volume is significantly close to those in large markets, such as NCR and Mumbai.
  • Supply of new office spaces saw a commensurate increase to leasing volumes, recording an increase of 13 per cent in full year 2018, as compared to 2017.
  • The total supply for 2017 was recorded at 36.9 million sq ft.
  • Pune (229 per cent) and NCR (86 per cent) saw maximum new completions during 2018.
  • Mumbai (-37%) and Chennai (-28%) saw a decline. The decline in fresh supply in Chennai has also impacted level leasing activities.
  • Vacancy witnessed a marginal improvement in the last year, settling at approximately 12 per cent at the end of 2018, with the southern cities of Bengaluru (four per cent), Hyderabad (seven per cent) and Chennai (11 per cent) keeping the vacancies low. Pune also recorded a low vacancy at eight per cent.
  • Leasing by co-working spaces saw a significant rise of 52 per cent y-o-y in H2 2018 (June-December), as compared to the same period in 2017. BFSI, led mostly by payment gateway companies, formed 18 per cent of all leasing transactions in H2 2018.

See also: Institutional investments in Indian realty touch the highest level in a decade: Report


CityNew completion (million sq ft)
H1 2017H2 2017Full year 2017H1 2018H2 2018Full year 2018Percentage change (2018/ 2017)
Total 7 cities20.112.532.718.218.736.913%

Source: Knight Frank Research


CityLeasing activities
H1 2017H2 2017Full year 2017H1 2018H2 2018Full year 2018Percentage change (Full year 2017/ full year 2018)
Total 7 cities19.222.641.821.525.246.7812%

Source: Knight Frank Research


Commenting on the findings, Shishir Baijal, chairman and managing director, Knight Frank India said: “The commercial market surpassed previous records and registered a new high in 2018. Bengaluru continued to demonstrate its frontrunner status, by clocking an all-time high transaction volume. Leasing volumes and fresh supply, have shown growth trends in 2018, which are reflective of heightened economic activity. 2019 is expected to witness undercurrents of several geo-political events and resultant economic developments that may impact markets and businesses.”


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