Gross absorption of commercial space in India touches 48.1m sq ft; tech & co-working space drives demand

Gross absorption of commercial space across the country touched 48.1 million square feet (msf) with demand largely led by expansionary activity by occupiers in the technology and IT-business process management (BPM) space, ramp-up by co-working players and investments of companies in global capability centres, according to a report by Cushman & Wakefield.

Co-working players leased nearly 5 msf, the highest ever, of office space during last year.

Bengaluru saw the highest absorption of about 32 percent. Hyderabad, which witnessed its highest leasing activity ever (21 percent), is seeing frenetic demand, with no signs of a slowdown till at least 2020. Gross absorption in Delhi-NCR rose 30 percent to 9.2 msf, the report said.

Net absorption, or incremental new space take-up too, has seen a healthy 12 percent jump to 29 msf, across the top eight cities, led by strong expansion plans of occupiers and entry of MNCs into newer geographies amid sturdy business confidence. The surge in net absorption displays huge confidence in the market, undeterred by the impending elections this year, the report stated.

The surge in demand was well absorbed by quality supply that came into the market in 2018. Developers completed several projects prior to the 2019 general elections to avoid delays in attaining approvals during the election period, it notes.

Supply rose 34 percent year-on-year to 34 msf during the year, with Bengaluru accounting for the largest share at 27 percent, it said, adding that Mumbai emerged as a surprise front-runner with a 19 percent share in supply at 6.4 msf

Another trend was that of large deals. Expansionary activity by occupiers has led to the resurgence of large deals (above 100,000 sf) in the market, whose tally was around 111 deals.

Total space leased through large deals rose 31 percent year-on-year to 27 msf during the year in a sign that occupiers have increased assurance in their business and growth, with India continuing to figure prominently in their expansion plans, the report stated.

Large deals accounted for 57 percent of total Grade A leasing during the year from almost 50 percent share in 2017, it noted.

Being the tech capital and home to prominent startup unicorns as well as the hub of new technology and R&D firms, Bengaluru accounted for almost 42 percent of large deals. This was spurred by sectors such as BFSI (banking, financial service and insurance) and engineering sectors for their captive centres. Hyderabad, which had a share of 22 percent in total large deals, witnessed large deals by IT-BPM and captive centres.

“India’s office market hit an all-time high with leasing activity scaling 48 msf as forecasted earlier. It signals strength and resilience of commercial markets. Nearly 30 percent of gross leasing volumes came in the form of pre-leasing activity, which bodes well for the continued confidence in the country’s economic might and growth prospects. Vacancy rates in core office corridors is expected to be tight in major cities such as Bengaluru, Hyderabad and Pune, with substantial supply in 2019 pre-committed already,” Anshul Jain, Country Head & Managing Director, Cushman & Wakefield India, said.Pre-leasing also saw a record 15.6 million space being committed, which accounted for almost 31 percent YoY growth. Bengaluru saw pre-commitments of 5.5 msf, garnering 36 percent share of total. This was followed by Hyderabad with a 32 percent share, reflecting lack of immediate ready space due to limited vacancy in both cities. Pune with its ultra-tight vacancy also recorded pre-commitments to the tune of 3.3 msf, the report stated.