Office Space Absorption in India Leaped by 11% in Q1 2016!

Having a great business confidence and a positive economic status, the office space absorption during the first quarter (January – March) of 2016 has increased by 11% which comes up to 8.8 million sq. ft. in the nine major cities in India. According to the report, the office absorption that has jumped by 11% (about 8.8 million sq. ft.) includes the earlier commitments of about 8 lakh sq. ft. across all the nine major cities in India.

Primarily, the absorption was derived by technology sector, which is the traditional demand driver. As told above, the growth is mainly backed by the positive economic sentiment and the business confidence index (BCI); the BCI got increased by 5% in January and the Gross Domestic Product (GDP) forecast by 7.5%. With the huge demand for office spaces, Bengaluru topped the demand with the share of 33%, and it’s followed by Delhi, Gurgaon, Noida, Hyderabad, Pune and Mumbai.

Optimistic Market Sentiments

• Major markets in India are relishing this growth in the first quarter and the overall market sentiments seem to be very positive. It’s also expected that the same positive momentum will continue in the coming quarters as well, as the pipeline of office leasing seems to be strong and steady.

• Real estate experts have also said that business confidence index and the positive economic growth will be the major factors influencing the demand for office space in the coming quarters. If we look at the statistics, Bengaluru has witnessed the total absorption of 2.6 million sq. ft. which is actually a jump of 13% when compared to the last quarter.

IT Sector Leads the Demand

• It’s usual that it’s the IT sector that drives the demand for office spaces, and it’s not a surprise in this quarter as well. IT and ITeS sectors continue to drive the demand with the share of 88% from that of the overall absorption.

• The National Capital Region registered an overall absorption of 1.42 million sq. ft. with the real estate market in Gurgaon recording the absorption of 7 lakh sq. ft. to uptake the first quarter of the on-going year, which is actually 30% less than the first quarter of 2015.

• Noida and Delhi registered the absorption of 3.8 lakh and 3.4 lakh sq. ft. respectively, whereas in Hyderabad, the demand for office space has been robust and it witnessed the gross leasing of 1.27 million sq. ft.

Along with IT, there are ecommerce and digital companies that have announced the plans of their huge investment to support the expansion of technology development centres in India. Amazon, one of the major ecommerce players are committed to the huge investments in order to set up the largest facility, and has leased about 3.5 lakh sq. ft. space in Hitec city, Hyderabad. It’s also been said that Apple is also making its move to open its first tech development centre in the country.

In spite of continuing to entice the interest of occupiers, the absorption level in Chennai has seen a significant dip of about 42% when compared to the previous quarter which recorded the absorption of 7 lakh sq. ft. out of which 86% was the contribution of IT sector. Same is the case of Kolkata, which witnessed the absorption of 1.7 lakh which is 32% less than the previous quarter’s absorption (2.5 lakh sq. ft.). But on the whole, first quarter seems to have been satisfactory for commercial real estate in India.

Sahaana Jai, the author of the above article is working in a real estate concern offering office space in Bangalore. She is a blogger as well as a web enthusiast.