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India Office Property Market

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With an expanding economy, improving business sentiment and increasing job creations, the momentum in demand for office real estate is expected to stay in India.

The Indian economy continued to see positive trends as India’s GDP recorded a 7.5% growth in the quarter, October – December 2014 and the forecast is for the GDP to expand by 7.8% in 2015 first-quarter. Both the economy and the office market turned the corner in 2014 and are poised for further improvement in 2015. According to Colliers International a global real estate services and investment management firm, in response to tenant demand, the strongest markets namely Bengaluru and Gurgaon will witness development of new stock.

Key under-construction projects – Delhi – Colliers International

In Delhi, the demand will primarily come from the companies looking to locate near Government offices. Less supply addition due to limited land availability will keep the overall rents stable however select premium building will continue to command premium above market rates. As the economy expands, improvement in overall leasing is expected in coming quarters. Gurgaon suburb remains the most preferred office location due to location advantages, competitive rents and robust under-construction developments in the pipeline, especially in micro markets. NOIDA will witness demand primarily from midscale IT / ITeS companies and large corporations near expressway.

Key under-construction projects- Mumbai – Colliers International

In Mumbai, for the last four consecutive quarters, there has been an increase in the absorption of office real estate. This is likely to continue on the back of an improving economy and demand from IT/ ITeS and BFSI sectors. The markets are also witnessing a clear price segmentation with tenants being less price sensitive in prime markets like Central Business Districts (CBD). However, the developer sentiment towards speculative construction of office buildings is expected to remain cautious and this in turn will limit the risk of further overbuilding.

Key under-construction projects- Bengaluru- Colliers International

Likewise, the office market of Pune will continue to remain upbeat due to strong fundamentals. IT/ITeS will remain as the key occupier in the coming quarters of 2015. Vacancy is expected to decline due to lesser amount of new supply and increase in absorption.

Key under-construction projects- Kolkata- Colliers International

In chennai, the demand for office space is expected to gain further momentum in line with the revival in economic growth however, the high vacancy level coupled with upcoming supply is likely to restrain the rent growth particularly in micro-markets over the next few quarters. But, the overall Bengaluru office market is in the “sweet spot” in terms of supply-and-demand fundamentals. According to the report, the steady increase in development activity and greater domestic and foreign investor interest in office market should result in additional occupancy and rent growth.

In contrast, Kolkata is expected to see very limited supply in the form of small- to medium sized projects as developers are focusing on finishing projects with small- to medium-sized floor plates, which are relatively easy to lease. Rentals are expected to remain stable primarily because of existing vacancy and low absorption base.

The Knight Frank India, an international global property consultancy states that the turnaround in the office space market witnessed in 2014 has been maintained on the back of improving business sentiments and recovery in the domestic economy. The average vacancy level across these markets stands at 17% – the lowest since the global financial crisis as the leading ecommerce players are now emerging as strong drivers. According to the consultancy, the takeaways for All India office property market are:-

Severe shortage of good quality office space; demand consistently surpassing supply since 2014

Office market turning from a tenant driven to a landlord favouring market

Other services sectors including e-commerce, consulting and media gaining prominence during H1 2015

All-India Office market trend – Knight Frank India



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