Emerging trends in India’s office sector

Maturing real estate market in India will result in further growth and supply of office supply

The face of India’s office sector is evolving at a rapid pace. From urbanization of Indian cities to the rise of mega structures to the introduction of various new policies favouring the growth of a strong commercial real estate in the country, a number of factors continue to drive the segment’s growth.

Owing to these factors and rising investor interest in the Indian market, the country has witnessed strong absorption of offices during the year 2018. The total office leasing towards the end of 2018 was to the tune of approximately 33 million sq ft. In fact, a robust office sector absorption is predicted until 2020. This year, India will also see the announcements and subsequent listings of a number real estate investment trusts (REITs). This will propel the market in a new era and will help development firms to build more and more quality, Grade A offices.

With growing amount of leasing and investors’ activity, the office segment once dominated by information technology sector companies is now witnessing leasing by non-IT companies from other sectors. Hence, BFSI, consultancy business, telecom, healthcare, biotech, real estate construction, e-commerce and co-working service providers are actively taking up spaces.

The increase in demand from non-IT occupiers across cities is evident from the changing pattern in occupier distribution being observed.

A city-wise glance of space take-up by non IT/ITeS occupiers reveals that while in Bengaluru, Delhi/NCR and Chennai it is the manufacturing/industrial sector that has been leading in space take-up starting from 2013 till 3Q18, in Mumbai and Pune, BFSI has been the most prominent one. For Hyderabad, while BFSI was the most prominent sector in non IT/ITeS space take-up in 2013-2016, gradually the emerging E-commerce sector and consultancy have started gaining prominence in 2017 and during first three quarters of 2018. In Kolkata, manufacturing/industrial sector absorbed highest proportion of non IT/ITeS office space in 2013-2016 which changed to consultancy gaining prominence in 2017, but reverted again to manufacturing/industrial sector contributing the maximum during the first three quarters of 2018.

A number of other alternatives, including co-working, data centres, educational institutions and healthcare facilities are increasingly gaining importance. Hence we see development and construction firms focusing on these segments too. For example, a comparison of the cumulative co-working space take up by different service providers across top 7 cities, during the first nine months (January-September) i.e till 3Q of 2017 and that of 2018 indicates a marked increase. While in the first nine months of 2017 the space take-up was 1.11 million sq ft, it increased more than three times to 3.44 million sq ft during the first nine months of 2018.

With the growth, new-age modern offices, occupiers and companies will focus on developing a Well-Certified environmentally healthy and sustainable buildings that offer flexible and a clean environment to the workforce. And trends suggest that country will continue to see an upgrade in already existing stock on these lines.

With evolving transparency in the market, the supply of offices is definite to increase in coming years.

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