Bengaluru contributes to 37% of total office absorption: Colliers Research

[] Despite the demonetisation drive, India’s office market is likely to remain firm in the coming quarters driven by the recovering economy, with Bengaluru accounting for the maximum demand among the major cities, according to a report by Colliers International

On the back of a recovering economy, India’s office market is likely to remain firm in the coming quarters. The gross office take-up in India amounted to 9.3 million sq ft (8,63,998 sq m).

You are reading: Bengaluru contributes to 37% of total office absorption: Colliers Research

Although this Q1 leasing volume represents a 25% decline q-o-q, volume is up by 8% y-o-y. The market also recorded about 2.5 million sq ft (2,32,258 sq m) of pre-commitments, signifying healthy demand, said a report, ‘India Office Property Market Overview, Q1 2017’ by Colliers International.

“The macro-economic scenario indicates a revival in consumption base demand, and the government’s push for digitisation of money transactions should continue to drive demand from the fintech sector. However, the concern of skill gap in the technology sector, is on the rise. Increased demand for high skilled work, such as automation, Internet of Things (IoT), big data and analytics, instead of process-based work, may lead to a short-term skill gap in the tech sector and disrupt the expansion plans of technology companies in the next 2-3 years. In our opinion, this may lead to more demand coming from consolidation,” said Surabhi Arora, senior associate director, research, Colliers International India.

  • The Bengaluru market maintained its top position across nine cities, despite low vacancy and recorded an overwhelming share of 37% of total absorption.
  • Mumbai and Delhi-NCR followed, with shares of 18% and 17% respectively in total absorption.
  • Chennai, Pune, Hyderabad and Kolkata accounted for 11%, 9%, 6% and 2%, respectively, in the overall leasing volume.

“The office markets of Bengaluru, Chennai and Pune continue to witness restricted supply and will see upward pressure on prime rentals going forward. In south India, Hyderabad continues to gain incremental demand in its Hitech/Gatchibowli precincts, suggesting that a few of the IT/ITeS occupiers have considered Hyderabad as an alternate location to Bengaluru, due to the availability of prime supply, causing significant uptake over the last couple of quarters,” said Ravi Ahuja, executive director, office services and investment sales, at Colliers International India.

“Mumbai and NCR have a decent pipeline of corporate office consolidations and relocations, with Mumbai gearing up to bring in huge prime quality supply in its new-found IT corridor at Thane-Belapur Road. This will result in significant take ups for large IT players, who want to relocate from expensive micro-markets like Goregaon and LBS Marg, to markets having less than a dollar’s rent per sq ft per month,” he added.


In Q1 2017, Bengaluru retained its top position in attracting overall occupier interest across nine key Indian cities. Driven by a handful of large transactions and numerous mid-sized space requirements (less than 1,00,000 sq ft), gross leasing volume was recorded at nearly 3.5 million sq ft (3,26,900 sq m), with about 33% increase year on year (y-o-y). Outer Ring Road continued to account for a major share in the total leasing volume, with 59%, followed by SBD (13%).

Although we expect occupier demand to remain upbeat in these locations, the upcoming new supply is unlikely to meet the rising demand in the coming quarters, resulting in upward pressure on rents. Absorption of pre-committed spaces and an expected upsurge in demand, are likely to outpace the upcoming supply pipeline of 8.1 million sq ft (7,57,160 sq m) by the year end.


Read also : Delhi Jal Board: How to pay water bills online?

In Q1- 2017, gross leasing reached 0.51 million sq ft (48,800 sq m), which is at par with the previous quarter. In comparison to Q1 2016, this figure represents a 60% decrease. However, in Colliers’ opinion, the surge in leasing in Q1 2016 reflected strong pent-up demand in the city, because of a stable political environment.

In line with past trends, concentration of Grade A properties in SBD garnered the maximum share of overall quarterly leasing. In Q1 2017, SBD accounted for an 80% share, followed by PBD (14%) and Off-CBD (6%).

[] Net office space absorption to be lower in 2018: JLL


Gross absorption in Q1 2017 for Chennai amounted to about 1 million sq ft (92,900 sq m). Although Q1 2017 numbers represent a 57% drop on a q-o-q basis, we expect the demand for office space to remain healthy, as about 1.2 million sq ft (1,11,500 sq m) of pre-committed space has been recorded in the upcoming SEZs in the OMR-Post Toll district, leveraging its proximity to the city’s airport.

The OMR-Pre Toll areas and CBD benefited from maximum occupier attention, accounting for 26% and 23% of total demand in Q1 2017, respectively.


The NCR recorded gross absorption at 1.6 million sq ft. Gurgaon, with 54% of total NCR absorption, remained the preferred choice among occupiers, followed by Noida and Delhi that shared about 25% and 21%, respectively.

The gross leasing volume in Gurgaon reached about 0.84 million sq ft (78,038 sq m), down by 11% compared to Q4 2016. Leasing momentum in Noida remained relatively subdued, with overall transaction volume reaching 0.4 million sq ft (37,161 sq m), down by 11% on a q-o-q basis. Corporate leasing activity remained relatively subdued in Delhi, with the gross absorption standing at only about 0.33 million sq ft (30,658 sq m), down by 15% q-o-q.

We attribute the decline in leasing, to the decrease in average deal size, which stood at 18,550 sq ft (1,718 sq m) in Q1 2017 as compared to 21,200 sq ft (1,969 sq m) reported in 2016.


Read also : Nerul property market: An overview

In Q1 2017, relocation transactions outnumbered expansions and new entrants, thereby, dominating the office leasing market in Mumbai. With absorption of 1.7 million sq ft (1,57,935 sq m), the leasing market remained subdued in Q1 2017 recording a 10% decline q-o-q.

Although leasing remained subdued, increased interest from investors is evident in the commercial property market. We observed a few outright purchases in Q1 2017.


Absorption continued its downward trend in Pune, primarily due to the inadequate supply of quality office space in the city.

Absorption in Q1 2017 came down to 0.8 million sq ft (72,853 sq m) from 1.3 million sq ft (1,19,845 sq m) in Q4 2016. Large occupiers such as FIS Global Business Solutions and Cognizant preferred to renew the leases in the existing facilities. With most of the new supply scheduled for completion in 2018, vacancy in Pune market is likely to remain tight in the short term.

We cannot rule out the possibility of further increase in rentals.


Q1 2017 started on a positive note for Kolkata, with gross absorption of 0.2 million sq ft (18,580 sq m). This excludes a large pre-commitment by Technology major Cognizant, which has opted for a built-to-suit (BTS) facility of 0.36 million sq ft (33,445 sq m) in Candor Tech space SEZ in the New Town area.

We expect tenant-favourable conditions to attract domestic companies and information technology majors, to expand operations, mainly in the New Town, Rajarhat and Sector V micro-markets.

Copyright belongs to:

Category: Lifestyle

Debora Berti

Università degli Studi di Firenze, IT

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button