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Bengaluru recorded gross office absorption of 3.7 million sq ft in Q3 2018, representing a notable hike of 55% from the same period last year. Total Grade A office leasing through Q3 2018 was 11.4 million sq ft. With various technology occupiers continuing to expand, the 2018 annual absorption forecast is pegged at 14.5 million sq feet.
"Despite the currency fluctuations, the gross leasing activity in India across major 7 cities was recorded at 36.4 million sq feet for the first nine months of 2018, up 26% YoY. Bengaluru again saw the bulk (30%) of leasing activity during Q3 at 3.7 million sq feet followed by Hyderabad which replaced Mumbai to be the second most active market," says Ritesh Sachdev, Senior Executive Director, Occupier Services at Colliers International India.
Further supporting the city's real estate growth is the steady demand from the technology sector that constituted 41% of the total leasing activity in Q3 2018. This was followed by the Banking Financial Services and Insurance (BFSI) sector accounting for 27% of leasing activity, flexible workspace operators (15%), engineering and manufacturing sector accounting (7%), and other sectors accounting (10%). The third quarter witnessed the largest volume of pre-commitments in 2018, amounting to 1.7 million sq ft by occupiers such as JPMC and Accenture. More technology occupiers are expected to explore pre-commitment options in preferred locations such as the ORR, CBD and SBD due to the limited availability of space.
New Grade A supply of around 600,000 sq feet was delivered in Q3 2018, bringing total new supply so far in 2018 to 5.2 million sq feet. In addition to scheduled completions, Q3 2018 witnessed 7.8 million sq feet of new project launches, with a scheduled completion timeline of 2021. Hence, the Grade A supply forecast is revised to 24.4 million sq ft over 2019-2021.
The upcoming completion of the Whitefield metro is encouraging developers to adhere to completion timelines, so as to cater to the strong demand. Over 2019-2021, Whitefield accounts for the largest proportion of new supply (31%), followed by Outer Ring Road (24%), and North Bengaluru (19%).
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