Kochi Realty Bytes: Tech Firms Dominated Office Leasing Activity

KOCHI:
CBRE South Asia Pvt. Ltd, India’s leading real estate consulting firm, today announced the findings of its latest India Office Market View –Q3 2019 report.

According to the report, leasing activity in the city declined in this quarter. However, the city witnessed supply addition in the form of a medium-sized SEZ development in Kakkanad in SBD. Space take-up was primarily concentrated in Kakkanad in SBD. Absorption was mainly driven by the closure of small-sized deals (less than 10,000 sq. ft.)

Commenting on the findings of the report, Ram Chandnani, Managing Director, Advisory & Transaction Services, India, CBRE South Asia Pvt. Ltd. said, “Rental values rose by about 7 – 9% on a quarterly basis in Off-CBD. Recent completion of quality, investment-grade supply has augmented occupier interest, a trend we expect to continue in the coming quarters.”

Ameeth Raja, Head – Advisory & Transaction Services, Tamil Nadu and Kerala, India, CBRE South Asia Pvt. Ltd. said, “Tech firms dominated leasing activity, followed by media corporates. The office segment in Kochi continues to attract occupier interest looking to move into investment-grade developments. The ready availability of SEZ developments will fuel demand in the Kakkanad micro-market”

Leasing activity in the country rose by more than 30% annually, crossing 47 million sq. ft. during the first three quarters of 2019 (2019 YTD). Bangalore, followed by Hyderabad, NCR and Mumbai, accounted for about 80% of the leasing during 2019 YTD. Leasing activity stood at about 15.4 million sq. ft. during Q3 2019, rising by nearly 23% on an annual basis.

Outlook
With office leasing activity scaling a historic high, space take-up is likely to pick up in the short term but will stabilize in the medium to long term. The gap between Bangalore and Hyderabad is anticipated to reduce, as Hyderabad’s growth will be driven by robust supply completions and demand led by pre-leased completions.

India’s position as a preferred outsourcing destination will continue to attract corporates from EMEA, the Americas and APAC. While tech corporates will continue to dominate space take-up; BFSI, engineering & manufacturing and research, consulting & analytics will account for a larger share in leasing on a yearly basis.

Flexible space operators are expected to continue expanding operations, resulting in their share in overall leasing remaining high by end-2019. They are anticipated to target secondary markets in tier I cities along with major micro-markets tier II and tier III cities.

Rental growth expected to continue
As in the previous year, rental growth is expected to taper in Bangalore, Chennai and Pune. Bangalore is likely to witness a marginal rental growth due to sustained absorption in quality developments. As the much-awaited supply continues to be released in Chennai and Pune, residual spaces along with higher quality of new space is likely to drive rental growth in the short to medium term.

In Hyderabad, even with rising absorption, the quantum of supply lined up for release is likely to limit rental growth in the medium term; over the short term, the supply-demand mismatch is likely to support rental growth. Strong demand for space in quality developments and planned infrastructure upgrade is likely to fuel marginal rental growth in the core locations of NCR and Mumbai in the short term. SEZ and non-SEZ rental values are likely to converge within the same micro-markets across cities. Overall, rentals are likely to remain firm with an upward bias
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