India’s commercial office market is on an upswing and top developers, funded by global investors such as Blackstone Group LP and GIC Pte Ltd, are leaving no stone unturned to grow their portfolios this year, anticipating high demand and good momentum in leasing.

A robust pipeline of new office projects are expected to be launched in 2019 as the office sector continues to attract capital, with Gurugram, Bengaluru, Mumbai and Hyderabad expected to witness the maximum supply even as demand continues to outpace supply in some cities.

Blackstone-backed Embassy Office Parks, which received approval from the Securities and Exchange Board of India (Sebi) to list its real estate investment trust (REIT) for raising 5,000 crore, is likely to launch its REIT this year. The REIT will be a boost to the real estate sector, at a time when the capital markets have been slow and a liquidity crisis caused by a prolonged cash crunch at non-banking financial companies.

This year, Embassy plans to launch a 2 million sq. ft office development, Embassy Taurus World Technology Centre, in Trivandrum. In addition, it will construct 1.5 million sq. ft in Embassy Tech Village, Bengaluru, which includes office space for JP Morgan and a hotel, said a person familiar with the plans, requesting anonymity.

Overall absorption of office space is expected to rise this year on the back of sustained demand from technology companies, and buoyant positive and investor sentiment. According to Colliers International India, gross leasing activity of 50 million sq. ft was recorded in 2018, the highest in the last eight years, thanks to buoyant leasing in Bengaluru and the National Capital Region (NCR). Compared with 2017, gross leasing rose by 17% as occupiers continued to expand and consolidate.

The growth in office space is despite a sustained slowdown in the residential sector where several realty companies are saddled with unsold apartments. This has led a number of developers to shift towards office projects, although the bulk of the office sector is still concentrated with a few top developers and investors.

Bengaluru led the overall office leasing in the country in 2018, according to India Office Market View report by CBRE South Asia Pvt. Ltd Tech companies dominated leasing activity, followed by engineering and manufacturing and telecom operators.

“Propelled by technology sector, Bengaluru witnessed robust leasing activity in 2018. We foresee the city to account for a substantial share of the SEZ pipeline as well," said Ram Chandnani, managing director, advisory & transaction services, India at CBRE South Asia.

K Raheja Corp., which counts Blackstone and Singapore’s GIC as two of its investors, added about 1.5 million sq. ft each in Hyderabad, Pune, Chennai and Mumbai in 2018, which it plans to double this year, said Vinod Rohira, managing director (commercial real estate and REIT).

K Raheja also has plans to grow inorganically, through acquisition of high-quality office assets, Rohira said?

He said “there are decent leasing enquiries" and the momentum is expected to continue till at least this year’s general elections.

Another Blackstone-funded developer, Bengaluru-based Salarpuria Sattva Group has planned three projects in the city. It has also planned two projects in Hyderabad.

Salarpuria’s managing director Bijay Agarwal said the company is focused on building a significant commercial office portfolio, while it also develops residential projects.

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