The Central Business District (CBD) of Connaught Place witnessed a growth in leasing activity during the quarter, mainly occurring in developments such as Gopaldas Bhawan and other major office spaces. Deals in the micro-market were largely in the range of 5,000 - 20,000 sq ft. with space take-up from corporates belonging to sectors such as BFSI and pharmaceuticals. Negligible supply addition coupled with sustained occupier interest led to a marginal dip in vacancy levels. Rental values remained stable on a quarterly basis, it says.
Commenting on the findings of the report, Anshuman Magazine, chairman –India & South East Asia, CBRE says, “The commercial real estate market in India has been performing well for the past two years. This is evident in the record absorption levels witnessed in 2016. India continues to show positive movement, despite global uncertainties. Policy initiatives undertaken by the government in the recent past are expected to bring transparency in the sector, which is a much needed step towards enhancing consumer and investor confidence.”
“Commercial activity and occupier demand is expected to remain steady in the coming months, backed by corporates looking to expand/consolidate operations. Regulatory clearances in key locations are also likely to boost leasing activity in the coming quarters. Occupier enquiries for medium to large sized office spaces are expected to be closed in forthcoming quarters, adding to the transaction momentum. Due to the limited availability of ready-to-move-in Grade A supply, occupiers with medium and large size requirements will focus on pre-commitments in under-construction/built-to-suit developments across key micro-markets in the leading cities in the country. Occupiers, while expanding their footprint, are likely to keep a strong check on city infrastructure and focus on space utilisation ratios and innovation in workplace strategies,” says Ram Chandnani, managing director – advisory and transaction services, CBRE South Asia Pvt Ltd.
On the supply front, a significant quantum of space is expected to be released in the decentralised locations of leading cities over the next few quarters. Most of this supply is concentrated in peripheral locations of leading cities, which is likely to attract enhanced enquiries and strong pre-commitment activity in the coming months. The government’s policy initiatives (RERA and REIT), coupled with the impact of the recent demonetisation drive is likely to result in the formalisation and regulation of the sector. This in turn, is expected to boost transparency and investment flows into the commercial real estate sector, going forward.
Meanwhile, an analysis by research and real estate intelligence service JLL India says that the NCR alone contributes about 41% to total pan-India vacant stock of 72 million square feet, followed by Mumbai contributing about 28%.Bengaluru, the second biggest office market in size after Mumbai, contributes just 4.2% to pan-India vacant stock. The analysis also says low vacancy levels in many Indian cities and the rising demand for high-quality Grade A space is likely to drive up average rents, but at varying degrees for different sub-markets. For instance, sub-markets such as the Secondary Business Districts (SBDs) of Bengaluru and Pune, and Hi-Tech City in Hyderabad are expected to outperform the average, with rent growing 4 to 6% year-on-year in the medium term (2017-18). Meanwhile CBDs of all cities, suburbs such as MG Road, Greater Noida in the NCR, Salt Lake in Kolkata among others, will see stability or a negligible rent rise of 0-1% in the same forecast period.