Office real estate sets a new high
The Indian office market weathered through the storms of subdued economic slowdown and muted consumer sentiment as it set new benchmarks in 2019. Nearly 52 mn sq ft of Grade A office space was completed and 46.5 mn sq ft absorbed in 2019. Office assets continued to provide stable returns, with global institutional investors and sovereign wealth funds showing an increasing interest.
The larger markets of Bengaluru, Delhi NCR and Hyderabad accounted for around 70% of the absorption in office spaces while Hyderabad registered the highest net absorption to office stock ratio. Although the new completions grew and were 1.5 times the average annual new completion since 2010, the vacancy levels dipped in 2019.
India office market on a growth path
2016 |
2017 |
2018 |
2019 |
Y-o-Y Growth 2019 (%) |
|
Net absorption |
33.5 |
28.7 |
33.2 |
46.5 |
40.0% |
New completions |
36.5 |
28.7 |
35.7 |
51.6 |
45.0% |
Vacancy |
15.1% |
14.0% |
13.5% |
13.0% |
Note: Top 7 cities include Delhi NCR, Mumbai, Bengaluru, Chennai, Hyderabad, Pune and Kolkata. Source: Real Estate Intelligence Service (JLL), 2019
Driven by tech companies and the rise of co-working spaces, the demand for office spaces is bound to expand further in the near future. With demand growing, the weighted average vacancy level of all seven cities is expected to remain stable, despite the expected augmentation in supply. With time, this growth in commercial demand is likely to transfer into higher residential demand, which augurs well for the future of the real estate market in India.