by Soumya Prakash
While Indian economy is in the adjustment phase in the aftermath of major governmental regulatory reforms coming to force in 2017 resulting in a temporary slowdown, the activity in the commercial real estate segment was not that bleak.
As per the Colliers International report, the office market continues to perform well in 2017 with about 10 million sq. ft. of office leasing in Q3, gross absorption totalled around 28.9 million sq. ft. over the first nine months. Whereas the number presented a marginal decline of about 1% compared to 2016 absorption figure (during the same period), the report expected the leasing momentum to pick up in Q4 reaching the yearly forecast of more than 40 million sq. ft.
Bangaluru remained the frontrunner in office leasing with a 31% share of overall demand followed by NCR at 25%, Hyderabad and Chennai at 12%, Mumbai at 10%, Pune at 8% and Kolkota at 2%. Of the total absorption, the traditional demand driver of Indian office market – technology occupiers represented 39% and Banking, Financial Services and Insurance (BFSI) accounted for 17%. With a 7% share of total leasing volume, co-working operators have marked their presence. Besides its cost-effectiveness and flexibility, co-working space is becoming more popular. The report expected the co-working space to expand in the short to medium term, notably in the cities such as Mumbai, Bengaluru, and Gurgaon.
As per a JLL India report, office property market of Delhi-NCR continued to be the leader for leasing volumes across Asia-pacific region during the first half (H1) of 2017. Apart from Delhi-NCR, Bengaluru also came ahead of other active regional markets, including Guangzhou, Manila, and Melbourne.
Whereas aggregate gross leasing for four of Indian tier-I cities including Mumbai, Delhi-NCR, Bengaluru, and Chennai registered a small 3% decline in the first half of 2017. A higher level of absorption activity was seen in Bengaluru with 11% growth and 14% rise in Delhi-NCR. However, this was offset by lower levels of take-up in Mumbai that saw 23% dip and 53% drop in Chennai. While Mumbai saw lower volumes in the second quarter as a few big-ticket deals did not crystallize in time, Chennai suffered from lack of quality office spaces in a low vacancy market.
The first half of 2017 has seen take-up reach just under 10 million sq ft across the four major cities, which is slightly less than the year-ago period when the take-up had exceeded 10 million sq ft. Traditional sectors remained the primary demand drivers but uncertainty surrounding US off-shoring policy and automation has seen Information Technology-enabled services’ firms exercise caution. Co-working operators have started to be major contributors of space take-up.
In 2016, due to high demand of quality office/retail space, commercial real estate market in India continued to grow at a steady rate especially in IT/ITEs driven markets like Hyderabad, Bangalore, Pune and Chennai. Positive changes in policy and regulations provided further boost to commercial segment.
Soumya Prakash is a writer who has been contributing in different fields of mass media under various capacities in the last two decades. His blogs on city infrastructure and real estate are pathbreaking!