India Office Space Leasing May Hit Over 60 Million Square Feet In 2019, Says Report
Office space leasing rose 23 percent to 15.4 million square feet in the July-September quarter across nine major cities, and may touch an all-time high this year at over 60 million square feet as tech corporates and co-working players continue to expand their operations, according to property consultant CBRE.
The cumulative absorption or leasing of office space has increased by over 30 percent to cross 47 million square feet in the first nine months of 2019 calendar year, the consultant said in its India Office MarketView Q3 2019 report.
India's commercial real estate has been performing well even as overall property market, especially housing, is facing a multi-year demand slowdown.
According to the data, office space leasing jumped over-two fold in Hyderabad to 4.1 million square feet during July-September from 1.7 million square feet in the year-ago period.
Chennai also witnessed more than a two-time increase in leasing at 1.8 million square feet from 0.7 million square feet, while Pune saw a marginal increase to 1.4 million square feet from 1.3 million square feet.
The demand for office space in Mumbai fell to 1.5 million square feet from 1.7 million square feet, while Bengaluru saw leasing activities declining to 4 million square feet from 4.4 million square feet. In Kochi, demand fell to 0.01 million square feet from 0.1 million square feet.
Office space leasing remained flat in NCR, Kolkata and Ahmedabad at 2.3 million square feet, 0.2 million sq ft and 0.1 million sq ft, respectively.
We expect further strengthening of occupier sentiment in the medium to long term, backed by corporates looking to expand or consolidate their operations.Anshuman Magazine, Chairman & CEO, India, South East Asia, Middle East and Africa, CBRE
Favourable government initiatives, transparency in real estate sector and right reforms will improve investor sentiments greatly in the coming quarters, he added.
"Similar to last year, we expect that occupiers would put in greater efforts to incorporate flexibility in their portfolios due to changes in the business environment," Magazine said.
According to the report, tech corporates, accounting for about a third of the leasing activity, drove office space leasing in the country during July-September 2019, followed by research, consulting & analytics companies (19 percent) and flexible space operators (15 percent).
The rise in share of flexible space (co-working) operators (10 percent in Q2 2019) was primarily a result of their continued expansion across almost all cities. These operators took up both primary and secondary spaces in mostly core locations across cities.
Other sectors such as engineering & manufacturing (7 percent) and BFSI (7 percent) also contributed to the increase in leasing activity.
The share of tech sector rose from 31 percent to 40 percent annually during the first nine months of 2019, said Ram Chandnani, MD (Advisory & Transaction Services), India, CBRE South Asia.
This implies that a rise in technology alternatives, insourcing/job preservation in the U.S. and a global slowdown have not had any specific impact on India's position as a preferred outsourcing destination for both high-skilled and low-skilled tech services, research and development, he added.