Mumbai and Bengaluru are expected to lead the country in terms of total operational Grade-A office stock of 100 million sqft and about 93 million sqft, respectively, by the end of 2015, according to a study.
Strong demand from IT occupiers for relatively larger spaces is helping Bengaluru to build more, which will gradually narrow down the gap in operational stock of both these cities, the study said.
The study titled 'Housing for All: Catalyst for development & inclusive growth,' was conducted by The Associated Chambers of Commerce and Industry (ASSOCHAM) jointly with property advisory firm JLL.
Amid tier-II cities, Pune is expected to lead the market in constructing new office spaces thereby adding about 45 million sqft space, it said.
According to the study, the total stock of Grade-A office space across top seven cities is likely to settle at 440 million sqft by end-2015.
Robust take-up of about 31 million sqft is projected for 2015 while a total of about 34 million sqft of office space is expected to become operational.
"Over the past few months, an improvement was seen in occupiers' sentiment in commercial real estate", said D S Rawat, secretary general of ASSOCHAM while releasing the findings of the study.
"With a pro-business government at the Centre, the office sector is expected to see a lot more traction and various multi-national (MNC) occupiers and investors entering the country", said Rawat.
During the second half of 2015, an improvement in business sentiment will likely result in greater confidence and implementation of expansion plans will result in an increase in net absorption, the study said.
The study has forecast that 2015 will provide a window of
opportunity for occupiers and investors as rents and capital values in most of micro-markets are at their cyclical bottom.
Select micro-markets of cities still offer attractive rents as compared to its peak while several of them have already shown signs of revival due to strengthening demand for office space, it noted.
Vacancy rates are likely to be in the range of 15-18 per cent by end-2015, the study added.
Amid tier-I cities, NCR, Mumbai and Bengaluru are likely to witness big ticket transactions along with substantial number of leasing transactions in operational and under-construction projects.
While among tier-II cities, Pune is expected to see healthy demand in the medium term as few quality information technology (IT) special economic zones (SEZs) are in an advanced stage of construction with strong pre-commitments.
In terms of supply of newly completed office spaces, Delhi-NCR (which saw lot of completions in first half of 2015) is showing a forecast supply of 10 million sqft at the end of 2015 while Mumbai and Bengaluru are expected to inject about six million sqft and about eight million sqft respectively of new office spaces.
Against this supply, Delhi-NCR, Mumbai and Bengaluru are forecast to record net absorption of 6.1 million sqft, about seven million sqft and 7.6 million sqft respectively by end-2015, the study said.
