Bengaluru tops in office space absorption

While residential real estate in India is yet to find its right growth momentum, its commercial counterpart has been witnessing a steady growth for the last few years and is expected to have a healthy demand-supply ratio over the period of 2013-2017.

According to a survey report, jointly released by global real estate consultants, Cushman & Wakefield and Global Real Estate Institute, the estimated demand for office space across top cities during the period is expected to reach 132 million square feet (msf) with Bengaluru to record the highest office space absorption of 32 msf in the next five years.

Though at the current level, office space absorption across the country is expected to be about 22.5 msf in 2013, which is 26 per cent less over previous year, experts believe that the momentum of absorption will pick up by 2017 recording about 128 msf. The report also noted that due to current economic slowdown many companies have deferred their leasing requirements.

The publication titled ‘Decoding Realty: Changing Dynamics of Indian Real Estate’ has noted that next to Bengaluru, Mumbai will have its net absorption to be at 24 msf followed by NCR (23 msf). Pune and Hyderabad are expected to record absorption of about 14 msf of office space each while Chennai office market will absorb 11 msf.

Ahmedabad and Kolkata have finished the survey with three msf and seven msf of total absorption, respectively. The supply of new office space for the same period is expected to be approximately 143 msf. in which, 90 msf is currently under various stages of construction that will be completed by 2015. Of the eight top cities, Delhi-NCR is projected have highest supply of 38 msf till 2017 in which 23 msf will get absorbed.

The report also noted that lowest office space supply would come from Ahmadabad with three msf with more than 100 per cent absorption level followed by Chennai and Pune with 6.5 msf and 12.5 msf, respectively.

The commercial office real estate sector has seen postponement of considerable number of supply in the recent times due to delays in regulatory clearances and lack in demand. Similar trend is expected to continue in the next few years due to issues such as low demand from occupiers and funding problems that developers have been facing.

Sanjay Dutt, Executive Managing Director, South Asia, Cushman & Wakefield commented: “The office real estate market in India is expected to remain attractive for occupiers with steady increase in absorption after a trend of decline in 2013. With economy is expected to become stable in the post election period from 2015, the absorption trend will pick pace especially in established markets such as NCR, Bengaluru and Mumbai. 

We expect growth to set in from the second half of (June) 2014 when an increase in leasing activities, on account of entry of new companies into the country, relocation and consolidation activities and indeed expansion of existing companies, is expected to continue.”