Laborers clean windows near signage for Yes Bank Ltd. at the Indiabulls Real Estate Ltd. Finance Centre in Mumbai, India (Photographer: Dhiraj Singh/Bloomberg)

Office Space Leasing At All-Time High In India’s Top Cities

Office leasing rose to a record in India’s top cities in the three months ended March that is usually a muted quarter, driven by demand from technology, banking-financial services and e-commerce companies.

Nearly 11 million square feet of space was taken up by companies in the top eight markets, according to a report by CBRE South Asia. That’s a 25 percent jump from the same period last year.

The January-March period usually witnesses subdued office leasing activity as corporates are still finalising their business strategies, CBRE said in its report. This year saw a departure from that norm as many projects that were under construction got completed and leased.

“Over the past several quarters, pre-commitments by occupiers in under-construction projects has impacted leasing activity across India’s office market,” said Ram Chandani, managing director of Advisory and Transaction services, CBRE in the report. The trend of occupiers committing to the space before completion had been gaining traction due to the constrained supply of ready-to-move-in space and higher rentals. “The uptick in leasing activity in the first quarter is largely due to several projects getting completed,” he said.

As corporates continue to evaluate cost-effective options and stagger their expansion plans, pre-commitments in under-construction projects will have a significant impact on office leasing activity across key cities.
Ram Chandani, MD, Advisory and Transactions, India, CBRE South Asia

Bangalore was the hot spot for office leasing and was the key driver for the jump. It accounted for more than the combined share of other markets, including Mumbai, Delhi-NCR and Hyderabad. In fact, except Bangalore, Mumbai and Kochi, all other cities saw a marginal sequential dip in the space take-up during January-March, the report said.

The demand for office space was led by technology and banking and financial firms that accounted for half of the office space take-up. Share of e-commerce firms also rose due to a few large-sized deals. Key transactions included leasing by Flipkart, Accenture, Covance and Bosch.

City Highlights

Delhi-NCR

  • Gurgaon dominated leasing activity.
  • Activity was primarily driven by the tech sector, followed by corporates from the research, consulting and analytics, and BFSI sectors.

Mumbai

  • Leasing activity witnessed an uptick in the city.
  • More than half of the leasing activity was in the Secondary Business District (SBD) and the Peripheral Business District (PBD) of Powai and Vikhroli.
  • Rental values remained stable during the quarter.

Bangalore

  • Continued to lead the India’s office demand and supply activity.
  • Quarterly leasing increased significantly due to culmination of pre-commitments.
  • Rental values across key markets in the city appreciated marginally during the quarter.

Chennai

  • Transaction activity was led by small-sized deals, mainly by corporates looking to consolidate or relocate operations.
  • Rents increased by about 5-7 percent in IT buildings in OMR Zone I, due to low vacancies and sustained corporate interest.

Hyderabad

  • Witnessed a marginal decline in leasing activity during the quarter.
  • Sustained occupier interest resulted in a majority of the quarterly leasing activity being concentrated in the IT corridor.
  • Rental values increased across all micro-markets, thanks to continued occupier interest and shortage of new supply.

Pune

  • The peripheral business district accounted for more than half of the city’s leasing activity during the review period.
  • Select micro-markets in the city witnessed quarterly rental growth.

Kolkata

  • Quarterly leasing activity and new supply addition declined marginally.
  • Rentals remained stable across all micro-markets.
  • Leasing activity was primarily concentrated in EM Bypass and Ruby Connector in SBD and Salt Lake V and Rajarhat in peripheral business district.

Kochi

  • Witnessed a marginal increase in leasing activity.
  • Rentals remained stable during the quarter.
  • Demand was driven by technology firms.
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