New Delhi: About 52 million square feet of Grade A office real estate was completed and around 46 million square feet was taken up absorbed in 2019 in the top seven cities of the country.
The office space supply in 2020 is expected to be 47.5 million square feet from over 51 million square feet in 2019, according to a report by JLL.
The net absorption is expected to be around 40 million square feet mark because of good pre- booking or pre-leasing of space to the tune of 30 percent by occupiers. Net absorption in 2020 is expected to be much higher as compared to the annual average of the past five years which was at 35 million square feet.
“The strong pre-commitment activity is an indication of the intrinsic strength of the Indian office market. Moreover, it bears testimony to the increasing importance of real estate in the business plan of corporate occupiers. In markets that have a shortage of quality office supply and increasing pressure on rents, the need to plan for future space requirements becomes critical. Hence, single digit vacancy markets drive pre-commitment levels with large companies finding it viable to commit to office spaces in the under construction phase,” said Ramesh Nair, CEO and Country Head, JLL India
“IT-ITeS occupiers account for a majority of the pre-commitment leases across most of the top office markets in India. They constitute more than 50 percent of the pre-committed office space in 2020. These occupiers require larger floor plates and this type of arrangement becomes a necessity in markets with limited availability of Grade A office spaces. Occupiers from the BFSI and co-working sectors are the next big contributors to pre-commitment in 2020 with a share of 13 percent each,” said Samantak Das, chief economist and ED, JLL India.
Some of the real estate markets like Chennai, Hyderabad and Pune have limited availability of Grade A quality office supply. But these cities led in pre-commitment activity.
Hyderabad saw maximum pre-commitment levels amongst the top seven office markets. Even in Chennai, Hyderabad and Pune, pre-commitment activity is largely in the primary office submarkets that have single-digit vacancy levels.
In the pre-commitment deals, projects by reputed developers with a good track record of on-time delivery. Well-planned amenities and contiguous large floor plates are important factors that entice occupiers to pre-commit to office spaces.