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India office property market overview

Comments Off on India office property market overview   |   May 8, 2014    05:09am   |Contributed by Indian Realty News

Mumbai: During 1Q 2014, the Mumbai office markets witnessed a further decline in office space absorption indicating cautious occupier sentiment. This lack of demand can be attributed to a low level of IT/ITeS sector participation in the overall absorption, which is currently the primary demand generating sector across the cities. This quarter only about 0.42 million sq ft of Grade A office space was leased with a few mid-sized deals concluded in Central and Western Suburbs, and Navi Mumbai.

Construction activities remained slow. No projects / phases of projects were completed this quarter. Developers also refrained from launching new projects due to low demand. More than 7.5 million sq ft of Grade A commercial office space was available for fit-out during the surveyed quarter of which, about 80% was concentrated in micro-markets like Andheri East, Lower Parel, BKC and Thane / LBS Road. Vacancy remained almost stable due to the limited addition of new supply. Rents and capital values for Grade A office space remained stable in all of the micro-markets.

VIEW: Sectors like BFSI and FMCG, have become cautious in office uptake. This coupled with reduced IT/ITeS absorption is likely to result in lower demand in 2014. Rents and capital values are thus expected to remain stable; however, micro-markets such as Andheri, BKC (Bandra-Kurla- Complex) and Lower Parel could see an upward movement in the range of 1 – 2% QoQ due to continued interest from the occupiers.


Delhi witnessed improved demand as office absorption nearly doubled this quarter amounting to approximately 0.3 million sq ft. Approximately 60% of this total absorption is contributed by large office space occupiers such as Moser Bear, Snapdeal and VFS Global. Remaining 40% of the leases were small office spaces (5,000 – 10,000 sq ft) occupied by the corporate offices of BFSI, airlines, real estate and media companies.

In the surveyed quarter, the city added 0.8 million sq ft of new, Grade A office supply. Projects contributing this supply were Hyatt Commercial Block by Asian Hotels in Bhikaji Cama Place; Ambience Tower by Ambience Developer in Rohini; and Prime Tower by DLF in Okhla Phase I. The total Grade A supply available for fitout this quarter was about 2.5 million sq ft, mainly concentrated in Jasola, Saket and Connaught Place. Average rent and capital values remained unaltered during 1Q 2014, however some new buildings demanding above-market prices due to their premium location and amenities offered.

VIEW: Occupiers will remain cost-conscious and prefer small Grade A properties for their corporate offices in the CBD area. The upcoming new supply in Aero City near the airport is expected to have an impact on the market dynamics with nearly 0.9 million sq ft forecasted to get operational in 2014. The location is expected to attract a significant number of occupiers due to its advantageous location and availability of Grade A buildings with state-of-the art amenities.


In Chenani, leasing transaction volumes continued to remain below average. Total absorption was 0.56 mn sq. ft. during the quarter. The majority of leases signed were for smaller, sub-25,000 sq ft office spaces. Micro-markets like Old Mahabali Puram Road and Guindy remained the standout performers this quarter. Having quality office space on offer combined with affordability has enabled these micro-markets to be preferred destinations for occupiers. A few projects / phases of projects were completed this quarter, including Ramaniyam ISHA by RamaniyamGroup at Thoraipakkam; KPR Towers at Nungambakkam; and VikramVikra at Vadapalani. All of these projects together add 0.09 million sq ft of Grade A office space to the city’s total inventory.

New project launches continued to remain limited. A phase of about 0.25 million sq ft in DLF IT SEZ-Block 2, located at Manapakkam, was launched by DLF Ltd this quarter and is expected to be completed by the end of 2015. The lack of major tenant moves and expansions by large occupiers has seen rents continue to remain steady in almost all micro-markets.

VIEW: The outlook for the leasing market across Chennai over the next 9 months is more positive than the previous two quarters. Improving sentiment and prospects for the global economy as well as rising business and consumer confidence should all combine to boost the sentiment of IT/ ITeS tenants who make up the bulk of tenants in Chennai.

Bengaluru (Bangalore):

Strong demand for Grade A office space witnessed during 1Q 2014 resulted in a 35% QoQ increase in absorption in the Bengaluru market. IT/ITeS remained the primary demand driver contributing approximately 80% in the total absorption of 3.8 million sq ft. This includes approximately 1.7 million sq ft pre-commitment deals from companies like IBM, Ericson and Hindustan Coca Cola Beverages for expansion purposes.

During the quarter, many large scaled projects / phases of projects were completed and added over 2.9 million sq ft of Grade A office space to the city’s total inventory. Enthused by this demand, a number of developers launched additional towers in their existing projects, including Divyasree Technopolis-Block D; Mantri Cornerstone-Block B; Pritech-Block 14 and RMZ ECO WORLD – Towers 4A, 4B and all of these projects together will add over 4.8 million sq ft office space to city’s inventory by the end of 2015. With demand and supply complementing each other, vacancy levels remain unaltered and about 11 million sq ft of Grade A stock was available for fit-out during the quarter. The capital and rental values also remained steady in almost all micromarkets in the city.

VIEW: The strong software export figures indicate increase in IT/ ITeS uptake in the coming quarters in the city. We anticipate modest increases in rents in micro-markets like Outer Ring Road and CBD due to occupier preference to other micro-markets like Whitefield and Electronic City.

Source: Colliers International, Money Control

News Published Under:   Chennai, Delhi, Mumbai, Real Estate Trends | Comments Off on India office property market overview