Office space leasing rises to 8 million sq ft in March quarter, new supply drops

Companies leased around 8 million square feet of office space across the top eight cities in India in the March quarter this year, registering a 8% year-on-year growth, according to property consultancy CBRE.

Delhi-National Capital Region (Delhi-NCR) led the office leasing demand, accounting for 19% of total transacted space, followed by Mumbai with 18% and Bangalore with 18%.

Companies in the IT/ITeS sector continued to be the biggest occupier of office space in the March quarter, accounting for a 37% share of overall space leased.

However, the share of other sectors such as engineering and manufacturing and BFSI rose to 18% and 21% during the quarter.

“Despite global uncertainties, the various policy initiatives like RERA, GST, infrastructure status for affordable housing, coupled with a robust infrastructure development roadmap, is making the country an attractive destination for corporates looking to start up or expand operations in the country,” said Anshuman Magazine, chairman –India & South East Asia, CBRE.

Small to mid-sized office leasing deals of below 50,000 sq ft accounted for almost 90% of all transactions in the March quarter this year, the report showed. Transactions of less than 10,000 sq ft comprised almost 43% of all transactions reported during the quarter, while 46% of the leasing deals were in the range of 10,000-50,000 sq ft.

Ram Chandnani, managing director – advisory & transaction services, CBRE South Asia said, “The first quarter of the year has set the tone for the office segment across key cities. We expect commercial activity and occupier demand to remain steady in the coming months.”

The supply of new office space, however, registered a 60% year-on-year drop during the quarter to 3.1 million sq ft.

Hyderabad and Mumbai accounted for more than 60% share of the total new office apace supply; followed by Pune at 19%.

“Delays in regulatory clearances were reported in cities such as Delhi NCR, Bangalore and Chennai, resulting in large supply slippages in mostly the peripheral locations of these cities. Negligible supply addition was recorded in Kolkata and Kochi,” the report said.

Transaction activity across cities remained concentrated in key micro-markets of Gurgaon in Delhi NCR, Airoli and Bandra Kurla Complex in Mumbai, Outer Ring Road, CBD and North Bangalore in Bangalore, Madhapur, Kondapur and Gachibowli (IT Corridor) in Hyderabad, the Old Mahabalipuram Road (OMR) stretch along Taramani, Perungudi and Navallur in Chennai, Hinjewadi, Kharadi, Nagar Road in Pune, Salt Lake Sector V and Rajarhat in Kolkata and Kakkanad in Kochi.

“With space constraints in core micro-markets, we are noticing corporates shifting towards peripheral/sub-urban locations which have adequate supply of quality space,” said Chandnani.