India office demand remains firm in 2017
There is a positive outlook for India’s office market, according to Colliers International’s first quarter 2017 India Office Property Market Overview.
The country’s gross office take-up comprised 9.3 million square feet during the first quarter. The market also displayed healthy demand by recording roughly 2.5 million square feet of pre-commitments.
Although first quarter 2017 leasing volume represented a quarter-on-quarter decline of 25 percent decline, volume is up 8 percent year-over-year.
Across cities, India’s technology sector continued to generate demand for office space, representing 51 percent of the total take-up during first quarter 2017, followed by engineering and manufacturing, at 11 percent, and banking, financial services and insurance, at 9 percent.
The Bengaluru (Bangalore) market retained its lead position across nine cities despite low vacancy, and recorded a 37 percent share of total absorption.
During first quarter 2017, a total of 2.0 million square feet of new space became operational in Bengaluru. While Outer Ring Road comprises 87 percent of the new supply, vacancy levels stayed low because most of new supply was either pre-committed or taken swiftly by occupiers. The remaining new supply was concentrated in Old Madras Road (10 percent) and North Bengaluru (3 percent).
Colliers anticipates new supply of approximately 8.1 million square feet will be added to the total stock through the rest of 2017, but will not meet the growing demand.
Total absorption for Mumbai and Delhi NCR followed with shares of 18 percent and 17 percent, respectively.
Overall leasing volume for Chennai, Pune, Hyderabad and Kolkata represented 11 percent, 9 percent, 6 percent and 2 percent, respectively.
India’s supply of class A central office space will be replenished throughout the next 12 months, but is unlikely to meet demand in cities such as Bengaluru, Chennai, Hyderabad and Pune.
Colliers anticipates continued upward pressure on prime rents, and expects a 5 percent increase in coming quarters across these cities. The rental outlook remains mostly stable in cities such as Delhi NCR, Kolkata and Mumbai, but prime buildings will continue to command a premium over average market rents because of tenants' appetite for class A developments.