Office space leasing up 10% in January-June 2018; co-working gaining momentum: CBRE

Office space leasing increased by 10 percent to over 20 million sq ft in the first six months this fiscal, driven by higher demand from e-commerce companies and co-working operators, according to property consultant CBRE.

In its latest report 'India Office Market View – Q2 2018', the consultant has tracked the supply and leasing of office space of nine major cities -- Delhi-NCR, Mumbai, Chennai, Kolkata, Bengaluru, Hyderabad, Pune, Kochi and Ahmedabad.

"Office leasing activity across India's top 9 markets rose by more than 10 percent, with leasing crossing 20 million sq ft during the first half of 2018," CBRE said, adding that Bengaluru , Delhi-NCR, Hyderabad and Mumbai led the leasing activity.

CBRE found out that about 16 million sq ft of office space was added during January-June 2018, up by over 40 percent compared with the first half of last year.

In supply, Bengaluru, Mumbai, Hyderabad and Delhi-NCR contributed more than 80 percent.

Among sectors, the share of the tech-companies declined from 33 percent to 28 percent during the period under review.

As expected, the share of co-working/business centre operators doubled to about 10 percent during January-June 2018 from just 5 percent in first half of 2017. E-commerce firms remained active, with their share rising from 2 percent in H1 2017 to about 10 percent in H1 2018.

"Corporates are likely to remain cost-sensitive, develop workplace strategies for efficient space utilisation, which will impact the office space absorption. We foresee pre-commitments in quality, cost-effective projects nearing completion which will have a significant impact on office leasing activity across key cities," said Anshuman Magazine, Chairman, India and South East Asia, CBRE.

Commenting on the report, Ram Chandnani, MD (Advisory & Transaction Services, India), CBRE South Asia said the office leasing activity is expected to remain stable in the short term, backed by corporates looking to expand or consolidate their operations.

"Across all cities, rising traffic congestion and public infrastructure have become key decision-making parameters significantly impacting location strategies of occupiers. We expect infrastructure initiatives (such as completion of highways and introduction of Mass Rapid Transport System (MRTS) services, etc) to significantly influence and drive occupier preferences in the coming quarters," he added.

Continuing the trend, CBRE said that the office space absorption was dominated by small-and medium-sized transactions.

Small-sized transactions (less than 10,000 sq ft) accounted for about 44 percent of the transaction activity in the quarter, while mid-sized transactions (10,000-50,000 sq ft) held a 42 percent share.

On the outlook, CBRE anticipated that prominent sectors such as BFSI, engineering & manufacturing, research & consulting and co-working/business centres will account for a larger share in leasing activity on a yearly basis.

"The use of ‘co-working spaces' is expected to rise, with the concept being adopted not only by start-ups and individuals, but also by well-established corporates with fluid expansion/occupation plans. This is expected to push up the share of co-working spaces in overall space leasing," it added.