The banking, financial services and insurance (BFSI) sector is gradually becoming active in office space leasing across top cities, with its share increasing from around 7% in 2012 to above 13% in the first half of 2015, according to property consultancy JLL India.
"This increase continues to ride on the back of a rising number of BFSI transactions in Bangalore and the National Capital Region (NCR), where office demand has been IT/ ITeS-dominated," said Ashutosh Limaye, National Director - Research, JLL India. Among tier-II cities, Hyderabad is witnessing a good number of lease transactions, followed by Kolkata.
The volume of leasing by the BFSI companies has also increased during the past two to three years, with the average deal sizes ranging between 5,000 sq ft and 15,000 sq ft in cities like Mumbai, NCR and Pune. While the number of smaller deal sizes seen in NCR has increased, bigger deal sizes - ranging from 20,000 to 30,000 sq ft - are seen in Bangalore.
The report also reveals a shift in location preference by BFSI players from central business districts to secondary business districts (SBDs) of major cities.
The total area leased in Mumbai's CBD reduced to an all-time low from 154,320 sq ft in 2012 to 13,500 sq ft in the first half of this year, while Delhi's CBD also witnessed a similar trend with the total area leased decreasing from 119,037 sq ft in 2013 to 25,510 sq ft in H1 2015.
Bigger deal sizes by BFSI players are being seen in the secondary business districts (SBDs). "While the larger areas leased in the SBDs are meant to serve mostly as back-offices, the front-offices too could shift to SBDs in a few years," said Limaye.
While rents will remain under pressure in CBD spaces leased by BFSI players in most Indian cities, the rental outlook looks bright for BFSI-leased spaces in key SBD and suburban markets such as Lower Parel and BKC in Mumbai, prime Gurgaon in NCR and Kharadi, Hadapsar in Pune. "However, property prices will continue to grow in this segment because of constrained future supply in key BFSI markets," he added.
A negative absorption is forecasted in Mumbai CBD for 2015 as some select occupiers are planning to move out. In contrast, Delhi CBD will continue to see reasonably good activity in terms of churn and commitment. "Vacancy of around 15% in Delhi CBD ensures that there is always some activity here," Limaye said.