Ab­sorp­tion of Com­mer­cial Realty Space Up 8% in Q1

The Economic Times - - Companies - Kailash.Babar @times­group.com

Mum­bai: Ab­sorp­tion of com­mer­cial real es­tate, in­clud­ing out­right pur­chases and leas­ing of of­fice space in In­dia’s top seven mar­kets, in­creased to 5.8 mil­lion square feet dur­ing the first quar­ter of 2016, up 8%, a year ago, ac­cord­ing to com­mer­cial data in­for­ma­tion and an­a­lyt­ics firm Prop­stack.

This sig­nals a con­tin­u­a­tion of the strong re­vival seen last year due to re­newed cor­po­rate con­fi­dence amid steady eco­nomic growth, which is an in­di­ca­tor of the econ­omy’s health and au­gurs well for job cre­ation. The num­ber of com­mer­cial real es­tate trans­ac­tions by com­pa­nies went up 23% dur­ing the quar­ter. The de­mand was led by com­pa­nies in bank­ing, fi­nan­cial ser­vice and in­surance (BFSI), e-com­merce and IT/ITeS sec­tors.

Some of the sig­nif­i­cant deals con­cluded dur­ing the quar­ter in­clude that of WNS in Mum­bai, UBS in Pune, ADP in Hy­der­abad and Gen­pact in Gur­gaon.

The of­fice vacancy rates across seven mar­kets – Mum­bai, Delhi-Na­tional Cap­i­tal Re­gion, Ben­galuru, Pune, Chen­nai, Hy­der­abad and Kolkata – de­clined to 14% from 26% a year ago. Of­fice space pick-up was ro­bust in the quar­ter ended March and vacancy lev­els also fell sub­stan­tially, said Raja Seethara­man, di­rec­tor at Prop­stack. “If the cur­rent mo­men­tum con­tin­ues, 2016 could well be a record year for of­fice space ab­sorp­tion in In­dia. Com­mer­cial real es­tate is clearly re­flect­ing the mood on the busi­ness front. And based on the pipe­line for of­fice space de­mand, we are head­ing to­wards reg­is­ter­ing a strong year,” Seethara­man said.

The sec­tor saw a turnaro- und in 2015 af­ter wit­ness­ing a lull for over three years, record­ing about 35 mil­lion sq ft of of­fice space pur­chases and leases in the country’s top eight prop­erty mar­kets. The fig­ure was the high­est since 2011, fol­low­ing sus­tained eas­ing of rentals ow­ing to global fi­nan­cial cri­sis.

Ac­cord­ing to Prop­stack, most cities showed a steady rental growth in the first quar­ter of this year, with the ex­cep­tion of Kolkata. While Pune led the pack in terms of rentals with an in­crease of 6.9%, Ben­galuru was next with 5.7%, whereas Del­hiNCR saw 2.8% growth and Chen­nai saw 2.6%. Mum­bai saw a mar­ginal in­crease of 1.2% while rentals in Hy­der­abad went up 1.4%.

Deals by both in­vestors and oc­cu­piers sug­gest that sen­ti­ment is im­prov­ing for the of­fice prop­erty mar­ket. Sig­nif­i­cantly, the 8% growth in ab­sorp­tion came with­out large deals of the sort seen last year.

Trans­ac­tions for of­fice space of over 25,000 sq ft formed the ma­jor chunk of space ab­sorp­tion in Pune and Mum­bai dur­ing the quar­ter. In Pune, such deals ac­counted for as much as 64% of the to­tal ab­sorp­tion vol­ume, while in Mum­bai the share was 45%.

In con­trast, last year had seen a pickup in large trans­ac­tions, led by Flip­kart, which leased 2 mil­lion sq ft of a cus­tom-built of­fice cam­pus in Ben­galuru, and Tata Con­sul­tancy Ser­vices, which rented over 2 mil­lion sq ft of built-to-suit space at Hi­ranan­dani Es­tate in Thane for 15 years.

No. of com­mer­cial realty deals by cos went up 23% in Q1. De­mand was led by com­pa­nies in BFSI, e-com­merce and IT/ITeS sec­tors

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.