Office market absorption in India is expected to surpass 37 million square feet by the end of 2019.
The office market segment exhibited a healthy growth of 16 per cent in 2018 with net absorption estimated to cross 33 million square feet this year. This trend is likely to continue, with net absorption expected to surpass 37 million square feet by the end of 2019, said Ramesh Nair, CEO and Country Head, JLL India, in the year end commentary and outlook for 2019 on the real estate sector.
“Signalling good news for occupiers and investors, demand for offices remained high across key markets. The demand traction is supported by a strong supply pipeline, with new completions in 2018 estimated to be at 38 million square feet, resulting in stable vacancy levels. The new completions are expected to further strengthen in 2019 and cross 43 million square feet,” he added.
Undergoing transformation
Structural reforms and a refined framework for establishing Real Estate Investment Trusts (REITs) have propelled developers to build quality offices. Positive developments such as the listing of the REIT by Blackstone-Embassy joint venture, which is likely to happen in early 2019, will open the market for similar REITs by other players.
Nair said, “As focus gradually shifts to the development of modern offices that meet the aspirations of new age occupiers, the market will see more such supply in the coming quarters.”
Hence, there will be a change in the proportion of Grade A stock in the decentralised markets. This would result in the emergence of alternate Central Business Districts (CBDs) in and around cities.
City-wise distribution of net absorption in office segment in 2018 is as follows: Of the 33 million square feet absorption in 2018, Mumbai accounted for 17.1 per cent, Bengaluru 33.07 per cent, Delhi-NCR 16.03 per cent, Pune 10.32 per cent, Hyderabad 8.37 per cent, Chennai 9.60 per cent and Kolkata 5.43 per cent.
Regaining momentum
The dust over policy changes has been settling fast as developers continue to focus on delivery of existing projects. Post the slowdown in 2017, launches in the residential segment revived and are estimated to cross 1,75,000 (68 per cent Y-o-Y) by the end of 2018.
With the support of government incentives, developers have been able to realign themselves to tap into the opportunities available in affordable and mid-segment housing.
Additionally, the commitment of $1.6 billion platform funds into the affordable segment indicates the growing focus of investors and developers. The trend is likely to continue in 2019 with heightened activity in affordable and mid-segment housing.