Not a single large deal for office space was signed in Delhi and NCR in the three months to March while there was just one reported in Mumbai, reports Shubhra Tandon in Mumbai. Rents are expected to remain where they are since some supply is coming in, though they could see a slight uptick in some prime locations.
Anshuman Magazine, CMD, CBRE South Asia, points out there could even be pressure on rents in NCR where office space is being added. In Mumbai’s peripheral markets too, rents will remain range-bound, Magazine believes, given the level of vacancies. The shortage of quality office space in upmarket areas, however, could see them trend up.
Bengaluru, which has led the pack in large office transactions for over a year, recorded eight large office transactions in the first three months of 2015, though the number was lower than that in the October-December 2014 quarter. Rohit Kumar, head (research), DTZ India, believes the lull may be temporary and expects the second half of the year will see more action.
Among the deals, American e-commerce giant Amazon is understood to have closed over 1.2 million sq ft space in Bagmane WTC Phoenix in Bengaluru for a rent understood to be Rs. 52 per sq ft per month; manufacturer of premium buses and trucks Volvo is said to have leased 136,000 sq ft space in Bagmane Tech Park for Rs. 88 per sq ft per month; and US retail major Wal-Mart is also said to have leased 200,000 sq ft space in Salarpuria Aura, among others, sources said.
Mumbai’s office market saw just one large lease signed in the January-March period of 150,000 sq ft against 320,000 sq ft in the corresponding quarter last year. With the banking and financial services space not seeing any action, office space continues to go a-begging; the one lease deal signed was that of Housing.com, which leased 150,000 sq ft space in Winchester/Spectra for a rent said to be around Rs. 90 per sq ft per month.
Sanjay Dutt, executive managing director (South Asia), Cushman & Wakefield, feels that the subdued trend could reverse if the economy picks up.
In January-March 2015, IT/ITeS companies contributed 44% to the office space absorption in India, followed by the e-commerce segment that contributed 14% to absorption. BFSI and manufacturing contributed 6% each, while sectors like consultancy, professional services, telecom, FMCG and retail took up the remaining space in smaller proportions, according to DTZ.
During January-March 2015, key office markets have seen absorption of around 8-8.8 million sq ft, a jump of 6% y-o-y according to DTZ India in seven markets that it tracks, while Cushman and Wakefield says it is a sharp 35% increase y-o-y from the eight markets it follows.