Monday, 15 December 2014

MNCs Bullish, Dominate Office Space Leasing

The US and EU MNCs are very bullish about ramping up their businesses in India after the NDA government took over in May.

The increase in demand of office space in July, August, and September 2014, against the same period in 2013, showed a growth rate of 58%, the latest report by Jones Lang LaSalle said.

“A net absorption of 9.3 million sq ft (93 lakh sq ft) of office space during the third quarter of 2014 is a good 1.58 times the quantum seen in the same period last year,“ Ramesh Nair, COO (Business & International Director) of JLL India, said.

This performance for a quarter's net absorption was bettered only once-in 2011. Market activity, measured in gross leasing volume (GLV), was also high at 10.62 million sq ft, clearly indicating that there are better days ahead for commercial realty, Nair said.

According to a thumb rule, for every 100 sq ft commercial space leased out, 13 new jobs are created. This means that fresh commercial space, under construction owing to demand, is likely to generate 10,000 jobs. This in turn would trigger demand for residential units for the middle-income group.

Nair said India's new government led by Narendra Modi has taken the right steps to infuse confidence and faith in the corporate world, which is now once again engaged in pursuing growth plans. According to the report, Bangalore and Delhi NCR led the revival, leasing almost 3 million sq ft and 2.5 million sq ft space, respectively. This is a big jump by 90% and 250%, respectively, over the same period last year.

Mumbai, Chennai, Pune, and Hyderabad maintained their quantum of leasing space with minor variation.

The actual vibrancy on ground is felt even more, since the GLV is higher than the net absorption by 15-20%.

The revival is strong, which is evident from the fact that demand mainly comes from European and American business houses. According to the report, India's `Grade A' office leasing market is dominated by US MNCs, which account for more than 45% of the leased space, while Europe-based MNCs account for 15% and Indian companies 30% of this pie.

Source: Times Property, Dec 13, 2014

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