Demand for commercial real estate continues to be robust, led by rising occupancy levels in both core office markets, including business districts as well as upcoming growth corridors.
Total gross leasing volume in India touched almost 13 million sq ft during the first quarter of 2019, which is 1.45 times higher than the corresponding quarter of last year, showed data from Cushman & Wakefield India.
Apart from robust leasing, top commercial property markets are also experiencing strong pre-commitment activity. During the quarter, nearly 1.8 million sq ft of office space was pre-committed.
A robust business ecosystem has been supporting the expansionary activity of occupiers, with pre-commitments made towards upcoming office space supply, especially in cities like Pune, Hyderabad and Bengaluru where vacancies continue to remain tight and in single digits.
“With a strong start across markets in 2019, the leasing activity this year is expected to gain momentum with the already high demand for quality office spaces. Demand activity is expected to heighten, with the pre-commitment activity as well as increase in net absorption levels seen in key markets this quarter,” said Anshul Jain, country head & managing director, Cushman & Wakefield India.
Interestingly, the Delhi-NCR region saw the second highest pre-commitment activity during the quarter despite 26.1% vacancy level with almost 1.7 million sq ft being vacated by occupiers as part of their relocation and consolidation plans. Strong pre-commitment activity in this market region also resonates with robust leasing activity of 2.8 million sq ft during the quarter, an 82% on-year growth.
According to Jain, captive centres will be a game changer in 2019, with multiple outsourcing contracts worth around
$51 billion, or Rs 355,192 crore, up for renewal across the country.
Going forward in 2019, flexible space operators continue to move forward with their expansion plans, IT-BPM and captive centres are also expected to drive demand for large spaces in the market. Co-working operators can look forward to a promising 2019, by profiting from the growing interest of occupiers from across the world, and from the inclination towards a mixed portfolio strategy.
Cities like Bengaluru, Pune, and Hyderabad continue to witness single digit vacancies, leading to faster rental growth in key office markets.
Net absorption almost doubled during the quarter from a year ago due to high supply. Hyderabad, Mumbai, and Bengaluru recorded almost a 3-time jump in net absorption levels. This strong growth demand is led by rapid expansion by occupiers in the technology and IT-BPM space, ramp-up by co-working players, and investments of companies in global capability centres.
Technology and IT-BPM sector accounted for the largest sectoral share in leasing at 22% in Q1 of 2019. Flexible workspaces have contributed close to 20% of office leasing. The emergence of space take-up in co-working affirms that corporates are aligned to the mixed portfolio strategy of fixed and flexible space going forward.