Office space segment on a revival path: Experts

E-commerce joins IT, banking/financial sectors in the list of key demand drivers

Office space segment across major cities is expected to bounce back as experts see strong demand from domestic as well global firms during the next few quarters.

According to CBRE South Asia chairman and managing director Anshuman Magazine, the overall market sentiment has remained optimistic during the first half of 2015 and has triggered office space demand in the third quarter as well.

“For the first nine months of this year, absorption has already reached about 23 million sq ft. Overall, market sentiments and activities in the corporate office space have accelerated this year. Major office space demand drivers continue to remain the information technology and banking/financial sectors, with the addition of the e-commerce sector this year,” he said.

 

For 2014, the leasing in the office space stood at 33 million sq ft, according to data from CBRE. And in terms of total corporate office space transactions for the entire year, the figures are expected to exceed those of last year, he said. “Also, we are bullish about the corporate office segment, which has been displaying strong demand trends and is likely to sustain the market for the next couple of years,” he said. Magazine added that global as well as domestic corporate firms have been expanding and/or consolidating their office spaces in recent months in the leading cities.

JLL India national director (research) Ashutosh Limaye said, "Good days are returning for office real estate and tenants will remain in an expansionary mode. Occupiers are not only leasing larger office space, but are also expecting all the space to be on the same floor. Developers are constructing bigger floor plates to meet the evolving demand.”

Due to demand for office properties, developers are also betting big on adding new spaces. The country saw a little over 10 million sq ft of office space addition in July-September, highest in nine quarters. This is a rise of 44 per cent on a yearly basis and 21 per cent on a quarterly one, CBRE said. Interestingly, commercial (non-IT) developments accounted for more than half of the newly completed supply, accounting for a share of more than 50 per cent.  Most of the new supply released during the quarter was concentrated in Gurgaon in Delhi national capital region, outer ring road, Whitefield and

Hebbal in Bengaluru; IT corridor/extended IT corridor in Hyderabad; Airport Road, Kharadi, and Pashan in Pune; and Thoraipakkam/ Sholinganallur in Chennai.

Magazine said a significant quantum of space is expected to be released in the decentralised locations of leading cities. Another interesting trend is that the demand for smaller office spaces, less than 10,000 sq ft, is also growing fast. Transactions in small-size deals, both leasing and buying, constituted 41 per cent of office take-up in the country in the June-September period, CBRE said. Those between 10,000 and 30,000 sq ft accounted for 33 per cent of the deals.

“Thousands of start-ups come up every month in cities such as Bengaluru, Pune and Mumbai. These firms are driving demand for small office spaces. When they get funding from investors, they go for larger spaces,” said Ashok Kumar, managing director of Cresa Partners, a property consultant.

GAINING MOMENTUM

• For 2014, leasing activity in office space stood at 33 mn sq ft
   
• For first nine months, leasing in office space has crossed 23 mn sq ft
   
• Experts expect the leasing numbers for 2015 to cross the recorded ones in 2014
   
• Major demand from IT and banking/financial sectors with addition of e-commerce this year