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Better Show In Q1 Salvages Half-yearly Figures For Office Space Leasing

There was nearly 10 per cent drop in office leasing space for Q2, 2018 compared to year-ago figures

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The 25 per cent increase in office space leasing across the top eight markets in the first quarter of 2018 (Jan-March) has managed to salvage the overall numbers for the first half (H1) of 2018 compared to H1 of 2017. In pure number terms, the Q1 of 2018 (11 million sp ft) saw more absorption of office space Q2 of 2018 which saw a decline in office leasing space (around 9 million sq ft) compared to both first quarter of this year and second quarter of last year. As per the figures reported for Q2, 2017 over 10 million sq ft of office leasing space were generated. However, overall, Q1+Q2 (2018) generated 20 million sq ft of office space under lease than 18 million sq ft generated in the first half of 2017.

These figures have been calculated by BW Businessworld based on the data set provided in the quarterly report released by property consultant CBRE in each quarter every year. The report is based on data analysed from nine major cities -- Delhi-NCR, Mumbai, Chennai, Kolkata, Bengaluru, Hyderabad, Pune, Kochi and Ahmedabad.

On the supply side too, the first half of 2018 performed way better than H1, 2017. In fact, CBRE found out that about 16 million sq ft of office space were added during January-June 2018, up by over 40 per cent compared with the first half of last year.

In supply, Bengaluru, Mumbai, Hyderabad and Delhi-NCR contributed more than 80 per cent of the office space, mostly led by co-working companies. Among sectors, the share of the tech-companies declined from 33 per cent to 28 per cent during the period under review.

CBRE report states that the share of co-working/business centre operators doubled to about 10 per cent during January-June 2018 from just 5 per cent in the first half of 2017. E-commerce firms remained active, with their share rising from 2 per cent in H1 2017 to about 10 per cent in H1 2018. "Corporates are likely to remain cost-sensitive, develop workplace strategies for efficient space utilisation, which will impact the office space absorption. We foresee pre-commitments in quality, cost-effective projects nearing completion which will have a significant impact on office leasing activity across key cities," said Anshuman Magazine, Chairman, India and South East Asia, CBRE.

Overall, the Office space leasing is expected to grow by an average 8 per cent to cross 100 million sq ft by 2020 in eight top cities. This will happen due to robust demand from corporates, property consultant JLL India had said earlier. The net absorption of office space stood at 28.7 million sq ft in 2017 calendar year and the consultant has pegged absorption at 30.2 million sq ft in 2018, 33.6 million sq ft in 2019 and 36.5 million sq ft in 2020. Unlike the housing sector, commercial real estate (office and retail properties) is witnessing reasonable demand and attracting huge institutional investment.

“The office space absorption growth is directly dependent and indicative of economic factors like the growth in GDP, access to institutional capital and stability in the market,” JLL India CEO & Country Head Ramesh Nair said. The demand for office space is expected to come both from domestic as well as global companies. “Our estimates of growth sectors impacting the office absorption for the next three years are IT/ITeS, e-Commerce and related businesses, BFSI and FinTech companies and business consulting and services firms,” he said.

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