Commercial Real Estate: Top Indian Cities Soon To See 8-year High In Office Absorption

Indian commercial real estate continues to witness strong growth momentum. As per a recent report, the country’s top seven cities are expected to see an eight-year high in the coming year in the absorption of office space.

As per a report by JLL India, the top seven markets of commercial real estate are expected to record an all-time high net absorption of over 37 million sq ft, a level that was last achieved in 2011. The cities that are covered in the study are Delhi-NCR, Mumbai, Bengaluru, Chennai, Hyderabad, Pune and Kolkatta.

India’s position has considerably improved in the World Bank’s Ease of Doing Business index. There has been reportedly 8.2 percent growth in Gross Domestic Product in the financial year’s first quarter. These and other factors seem to have a positive impact on the country’s commercial real estate segment, especially in the commercial office segment.

The report suggests that by the end of 2018, there will be a little over 33 mn sq ft of net office space absorption. This would translate to 16 percent Y-o-Y growth. The strong growth was driven by strong economic fundamentals, demand for good quality grade A office space, institutional investments in commercial office assets along with the rise of co-working office trend.

Here are some of the highlights of the report:

  • Bengaluru saw the highest absorption of office space at 7.9 mn sq ft in the first nine months of this year.
  • Mumbai and Delhi-NCR were next, with the three cities contributing almost 70 percent of the absorption across the country.
  • Chennai saw a 92 percent increase in this measure, at 2.3 mn sq ft. Pune was next with 50 percent growth over a year, at 2.1 mn sq ft.
  • Hyderabad and Kolkatta recorded absorption of 2.2 mn sq ft and 0.7 mn sq ft, respectively.
  • On the supply side, around 126 million sq ft supply is expected over the next 3 years based on the launch of new projects in several markets.

“This demand was traditionally driven largely by IT and IT-Special Economic Zone occupiers but, of late, we are observing a steady rise in the share of non-IT office developments in cities that have been traditional IT hubs,” Business Standard quoted Ramesh Nair, chief executive of JLL India, as saying.

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