India Office Market on a Higher Growth Trajectory
Investment in the real estate sector is expected to be about $6.5 billion in 2019, where office space investment is gaining the maximum share. Both foreign and Indian investors are showing a keen interest in the commercial office sector which indeed is witnessing a considerable demand with gross absorption of approximately 50 million sq. Ft was perceived in 2018 in major cities in India.
Developers and employers are forced to rethink strategy & facilities because of the adoption of new factors such as the use of technology, focus on wellness & experience and changing occupier requirements. In the next few years, the new formats of workplaces are going to be introduced with an amalgamation of workplace & technology to increase the productivity of the workplace and landlords emerging as wellness creators.
Office market across the top seven cities in India continued to grow during the otherwise gloomy economic conditions. Approximately 11 million sq. Ft. of Grade A office space is absorbed from a total of 12 million sq. Ft. which was completed in the last three months, confirming that the third quarter of 2019 is only strengthening the narrative which was set during the beginning of this year. However, to reach the scale of Pune & Chennai in record time, the total office stock in Hyderabad is expected to grow by more than 5 million sq. Ft. in a single quarter. With the net absorption in the 1st three quarters of 2019 across the top seven cities in the country surpassing the level achieved in 2017 & 2018, the office market in India continues to grow at the rapid pace. The new completion in this period is already surpassing the level which determined in the last three years.
The market of office space is to grow further and reach the historical levels by the end of this year, which is due to the demand driven by the tech companies and co-working spaces. Also, the demand for the office market is expected to grow at a similar pace for the next few years. The positive growth in the commercial demand is most likely to transfer to the higher residential demand, which indicates salutary for the real estate market in India.
In the 3rd quarter of 2019, Delhi NCR witnessed a substantial 74% year on year growth. The leading players who were driving leasing were IT/ITes, manufacturing & Healthcare, along with the expansion of co-working players. However, IT/ITes & co-working spaces contribute 35% & 10% respectively of the gross leasing activity. Gurugram witnessed a robust leasing transaction of approximately 3, 00,000 sq. Ft. in 2nd quarter of 2019 which resulted towards the contribution of 76% to the net absorption while as Noida on the other hand, has a share of 21%. With the strong pre-commitments being recorded in the upcoming office buildings in Gurugram, Noida, Greater Noida Expressway the net absorption in Delhi NCR is expected to increase in the coming quarters of 2019.