According to the latest report, the Office leasing activity in India’s leading markets increased by 10% which measures 20 million sq. ft. in the first half of 2018. As per CBRE South Asia, Bangalore along with Delhi-NCR, Hyderabad and Mumbai lead the leasing activity with 80% share.
The office-space lease was mainly done by the small and medium-sized transactions which include the Small-sized transactions with less than 10,000 sq. ft. space totaling nearly 44% of the transaction activity and the mid-sized transactions that ranged between 10,000 sq. ft. and 50,000 sq. ft. had a 42% share. However, there was only 1% increase in the share of large-sized deals with over 100,000 sq. ft. This increase was recorded at a growth of 4% to 5% only.
Anshuman Magazine, Chairman, India and South East Asia, CBRE said that Corporates are still likely to stay cost-sensitive while developing the workplace strategies for efficient space utilization and this will impact the office space absorption. We expect a prominent impact on the office leasing activity in all major cities while considering the pre-commitments in quality, cost-effective projects nearing completion.
The reason for the growth of pre-leasing activities particularly in Delhi-NCR, Hyderabad and Pune is because of the Banking, Financial Services and Insurance (BFSI), research, consulting and analytics. The Occupiers sustained to future-proof their cases and privet against the future rental increase by pre-leasing space in major cities.
In the first half of 2018, nearly, 17 million sq. ft. office space supply was added and it recorded an increase of over 50% in comparison to the first half of 2017. The four metro cities including, Bangalore, Mumbai, Hyderabad and Delhi-NCR accounted more than 80% of this supply addition and Chennai follows the trend. The rental values increase range from 1% to 7% in all micro-markets in Bangalore, Chennai and Pune.
The Office leasing activity is estimated to be stable in short-term as the corporates are looking for expansion. According to another official at CBRE South Asia, the increase in traffic congestion and public infrastructure are the two main reasons that impact the strategic locations of the occupiers. The official at CBRE South Asia said that they expect better road, highways and infrastructure along with the introduction of Mass Rapid Transport System [MRTS] to boost the occupier preferences in the coming time.
As per the experts, the Good & Services Tax [GST] leaves a minor impact on the commercial/office sector of the real estate as the rate is 18% in comparison to the earlier 15% service tax. Although, the sectors like BFSI, engineering & manufacturing, research & consulting are expected to account for a bigger share in the leasing activity annually.