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Office realty leasing rises 30%, on track to beat last year high

Tech corporates have driven the demand for commercial property leasing as office spaces touched 47 million sq ft in the first nine months against entire 2018’s performance of 48.9 million sq ft (30% hike), showed data from CBRE South Asia.

ET Bureau|
Oct 18, 2019, 08.18 AM IST
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Mumbai: Robust demand for office spaces has pushed commercial property leasing in the first three quarters of 2019 by 30% from a year ago, taking it closer to entire 2018’s performance and making sure that this year surpasses the peak touched last year.

Driven by tech corporates — accounting for about a third of the leasing activity — office space take-up touched 47 million sq ft in the first nine months against entire 2018’s performance of 48.9 million sq ft, showed data from CBRE South Asia. With this, office leasing activity is now expected to touch its highest level ever, estimated to be over 60 million sq ft in 2019.

Leasing activity stood at about 15.4 million sq ft during the quarter ended September, rising by nearly 23% on an annual basis. This was dominated by small- to medium-sized transactions. Small-sized transactions of less than 10,000 sq ft accounted for over 40% of the transaction activity in the quarter.

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“With office leasing scaling a historic high in 2019, we expect further strengthening of occupier sentiment in the medium to long term, backed by corporates looking to expand or consolidate their operations. Favourable government initiatives, transparency in the real estate sector and the right reforms will improve investor sentiment greatly in the coming quarters,” said Anshuman Magazine, CEO, India, South-east Asia, Middle East and Africa, CBRE.

Like last year, he expects occupiers would put in greater efforts to incorporate flexibility in their portfolios due to changes in the business environment. Occupiers continued to futureproof their portfolios and hedge against future rental escalations by pre-leasing space across various cities.

Bengaluru, followed by Hyderabad, dominated large-sized deal closures, while a few large deals were also reported in the NCR and Pune as well. Large-scale deal closures were mostly dominated by tech firms and flexible space operators. Firms belonging to sectors such as research, consulting & analytics, banking, financial services & insurance (BFSI), and engineering & manufacturing also closed large-sized deals.

Tech corporates led the office space take-up, followed by research, consulting & analytics companies (19%) and flexible space operators (15%). The rise in the share of flexible space operators (10% in the second quarter of 2019) was primarily a result of their continued expansion across almost all cities.

“The share of the tech sector rose from 31% to 40% annually during 2019 year-to-date, which implies that a rise in technology alternatives, insourcing / job preservation in the US and a global slowdown have not had any specific impact on India’s position as a preferred outsourcing destination for both high-skilled and low-skilled tech services, research and development,” said Ram Chandnani, managing director, advisory & transaction services, India, CBRE South Asia.

Supply addition rose by more than 80% in 2019 YTD on an annual basis, with about 43.5 million sq. ft. of development completions reported.

Four cities — Hyderabad, Bengaluru, NCR and Mumbai — accounted for almost 80% of this supply addition.

Compared to the first three quarters in 2018, the share of SEZs in supply dipped from 40% to 27% during 2019 YTD. Supply addition in the quarter also rose by about 6% on a quarterly basis, touching about 15 million sq. ft. More than 70% of this supply was driven by Hyderabad and NCR, followed by Bengaluru.

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India office realty market clocks 6-year high leasing in January-June: Report

Office realty in demand, but home sales fall

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