Office absorption expected to be 36 msf: Cushman & Wakefield

Bengaluru is expected to lead with at least 34% share in the total Grade A Net absorption, towards the end of 2015

In the latest market report by global real estate consultants Cushman & Wakefield, the net office absorption for top 8 cities will be recorded at 36.5 million square feet (msf) by the end of 2015. This represents an increase of 18% as compared to the year 2014. Bengaluru is expected to lead with approximately 34% share in the total Grade A Net absorption, ranging between 9-12 msf towards end of 2015. Delhi-NCR and Mumbai are expected to follow with absorptions ranging from 6.4-7.1 msf and 4.8-5.7 msf respectively.  

End of 2015 is also expected to witness new completions of approximately 43 msf, of which about 42% of this supply has already come in by Q2 2015.  The overall supply is expected to increase by 24% from last year. While Kolkata’s supply is likely to increase by at least 5 times as compared to the supply in 2014, Pune will witness over twice the supply of 2014 and Chennai a 26% increase. All cities except Hyderabad and Mumbai will see positive growth in supply in 2014.

Sanjay Dutt, Executive Managing Director, South Asia, Cushman & Wakefield, said“2015 is expected to be one of the best years for office absorption in recent times propelled by steady growth in the economy and renewed corporate confidence. The absorption trend in the first half was largely driven by the IT/ ITeS, Ecommerce and Outsourcing companies that are witnessing accelerated growth. Going forward this year will see many companies from these sectors further commit to larger spaces. Interestingly several new start-ups which are in growth mode will create considerable demand, helping office space absorption to remain strong”

OFFICE STORY SO FAR (H1 2015)

First half of 2015 (Jan –Jun’2015) saw the top eight cities of India recording overall net absorption of 17.9 million square feet (msf) for office spaces, a 32%  increase  over the first half of 2014. Regained expansion momentum, mainly in the IT-ITeS sector resulted in highest percentage increase in office space net absorption in Bengaluru (174%) and Pune (162%) over the same period last year. However, Delhi-NCR recorded a 38% decline in half yearly net absorption over H1 2014. Other markets such as Ahmedabad (59%) and Hyderabad (19%) too noted a sizeable decline in net absorption over the same period. Additionally, in H1 2015 nearly 21 msf new supply was infused across the top eight cities, which is 20% higher than what became operational during H1 2014.

Office space (All Grades)**

Source: Cushman & Wakefield Research

In H1 2015, overall vacancy shrunk to 18.5% from 20.5% during the same period last year. Robust demand amidst increasing occupier interest for expansions as well as consolidations and relocations to premium office spaces, mostly Grade A developments caused absolute decline in vacancy by 3 percentage points over the same period last year. Both Pune and Bengaluru witnessed vacancy dwindle by 5% and 2% respectively over the first half of last year due to a mushrooming eco system of start-ups, new entrants in the technology sector and increasing headcount by IT-ITeS players. Demand fuelled by the services sector accounted not only for healthy absorption for both cities but also high pre-commitments. In Chennai and Ahmedabad, vacancy remained at par with levels witnessed during the first half of last year even though the former witnessed a 3% rise in gross absorption over the same period. High relocations coupled with oversupply in the office sector caused vacancy levels in Delhi-NCR to dip marginally by less than one percentage point despite a 22% leasing uptrend over H1 2014.       

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