Mumbai: In a sign of pick up in commercial real estate demand, the office space absorption in the top seven cities in India grew by 35% at around 8.2 million sq.ft. in the quarter ended 31 December, as compared to around 6 million sq.ft. in the previous quarter, according to a report released by the property consultancy CBRE South Asia Pvt. Ltd.
The total office space absorption for the entire year stood at approximately 28 million sq.ft.—an appreciation of over 9% year-on-year, according to the report “India Office Market View".
“Going forward, demand is most likely to be concentrated in peripheral micro-markets of India’s leading cities, owing to the abundant availability of cost-effective, Grade A office space options," said Anshuman Magazine, chairman and managing director, CBRE South Asia.
Transaction activity was mostly led by office leasing in Bangalore, Delhi NCR and Mumbai while smaller markets, such as Chennai and Hyderabad, stagnated.
While the market remained focused on mostly small- and medium-sized transactions, there were a few big ticket transactions in sectors such as information technology (IT) and IT-enabled services (ITeS), pharmaceuticals and banking services in leading cities, such as Gurgaon, Bangalore, Hyderabad and Pune, said the report.
“Occupiers belonging to the IT/ITeS, banking/financial services and pharmaceutical sectors are likely to drive the demand for office space and contribute significantly to overall office space absorption levels." said Magazine.
Prevalent vacancy levels and subdued demand led to project delays over the last two quarters of 2013. During the fourth quarter, quite a few large commercial developments and special economic zones reached completion, adding around 7.3 million sq.ft. to the existing office space stock across India’s leading cities.
Pune led project completions, followed by Bangalore and Hyderabad, contributing about 71% of the total supply addition in the last quarter of 2013. The total office space addition by end-2013 stood at approximately 31 million sq.ft.