Tracking the journey of commercial spaces in India

The latest JLL research report ‘Indian real estate: Comprehending the varying speeds of growth’ tracks the journey of different asset classes from 2004 to 2015. Let’s discuss a few key trends emerging in the office market:

Office sector resurgence: 

After witnessing sub-30 million sq ft of net absorption for three years in a row (2012-14), 2015 saw absorption rise significantly to above 35 million sq ft. An aggressive expansion strategy adopted by many companies, particularly after going through a slow phase in the immediate preceding years, along with rising prominence of newer players in the e-commerce, healthcare and technology space led to the recent jump in occupancy. Unlike in the previous demand-recovery phase of 2010-11 where many occupiers had indulged in opportunistic buying, during 2015, the absorption was growing on the back of both lower rents and a positive economic outlook. Therefore, this recovery looked more sustainable and long-term in comparison with the one we saw in 2011.

Low vacancies, high rents:  

A gradual fall in vacancy, which is currently at its seven year-low level of 15.9%, in tandem with the rise in absorption, was a perfect opportunity for rents to rise faster. The rise was particularly fast in lower vacancy markets such as Pune, Bengaluru and Hyderabad, and apparently these markets are more preferred by the leasing giants within IT-ITES sector. Few other sub-markets such as Mumbai suburbs, Gurgaon (in NCR) and Chennai SBDs also witnessed moderately higher increase in rents.

Sectoral share of office occupancy: 

IT-ITES still dominates, ecommerce makes inroads while manufacturing holds potential.  ITITES sector has continued to remain the top in terms of share of office occupancy across major Indian cities. The sector continues to maintain its lead with a 35-40% share in office occupancy. Given the rising role of information technology in the context of global and domestic business transactions, we could assume that this dominance might sustain for a few more years.