Net absorption of India’s commercial office space could surpass 39 mn sq ft by 2020

The net absorption of commercial office space across India will exceed 39 mn sq ft by 2020 on the back of strong supply pipeline and stable vacancy levels. Also, with demand for co-working office space increasing over the last few years, the absorption by service providers has tripled to 3.44 mn sq ft in January-September 2018 period, JLL India and CII said in a report.

In the year-ago period, the co-working space absorbed was 1.11 mn sq ft.

While the net absorption in 2017 declined marginally to 28.7 mn sq ft, projections suggest a robust performance in 2018 at 33.3 mn sq ft. According to the report titled Emerging Trends in India’s Office Sector – Occupier Perspective, that was released at CII Facilities Management Conclave and Expo 2018,  the office market pan-India is likely to see completions ranging from 38-45 mn sq ft every year till 2020 indicating a strong supply pipeline.

From the vacancy perspective, the outlook is quite positive. Vacancy declined 30 bps to 13.7 percent in July – September quarter of this year compared with 14 percent recorded in the preceding quarter due to higher demand and lower completions recorded across India. Driven by steady absorption projection, overall office sector vacancy is likely to gradually come down in the medium term (2018-2020), the report states.

With non-IT/ITeS companies emerging as major demand drivers, the report shows companies in manufacturing/industrial segment in Bengaluru, Delhi-NCR and Chennai have been leading in office space take-up from 2013 till July – September quarter of this year.

In Mumbai and Pune, BFSI companies have led in office space absorption. Of the total non-IT/ITeS space absorbed by different sectors, substantial space has been taken up by the emerging co-working sector as an increasing number of office occupiers/tenants have started considering shared space as a preferred option for office operations. In fact, the share of co-working sector in total office leasing more than doubled to nearly 10 percent in the first nine months of 2018 compared to 4 percent year ago.

The report also covers the proportion of co-working sector in total office leasing across six cities of Bengaluru, Mumbai, Delhi NCR, Chennai, Hyderabad and Pune. According to JLL data, Mumbai’s share in total office leasing in co-working sector tripled to 21 percent during January – September 2018 compared to 7 percent in the corresponding period of last year. Bengaluru and Delhi NCR are the other prominent markets that saw their share growing by over three times.

The report says that nearly 40-45 percent of the demand for co-working space comes from corporates and large enterprises. Of the balance, small and medium enterprises along with individual professionals contribute 35-40 percent of the demand with 15-25 percent from start-ups. Also, a co-working space is likely to lead to cost savings of 20-25 percent in markets like Delhi NCR, Mumbai, Bengaluru and Pune compared with leasing a traditional office space. Currently, there are around 350 co-working players/service providers operating an estimated 500 shared workspaces across the country, compared with less than 30 in 2010.“Last few years have seen the exponential growth of co-working as a concept across major office markets in India. The concentration of co-working spaces is expected to intensify further in Bengaluru, Mumbai and Gurgaon due to the availability of infrastructure and a vibrant start-up ecosystem. In times to come, some tier II and III markets are also expected to witness the emergence of co-working hubs,” says Ramesh Nair, CEO and Country Head, JLL India.