In the latest report by global real estate consultancy Cushman & Wakefield, the net absorption of office space saw a declined by 18% year–on-year (y-o-y) to be recorded at 14.5 million square feet (msf) across the top eight cities[1]. Activities level was impacted by a significant drop in absorption levels in cities of Chennai (-51%) Pune (-41%) Mumbai (-36%) Bangalore (-34%) in the first half of 2016 compared to same time last year. The first half of the year was marked by unavailability of quality Grade A space in many cities, while other cities saw prevalence of small-sized deals, which together led to a decline in overall net absorption. In the same period Hyderabad saw a rise in net absorption of 55% y-o-y in H1 2016 while Delhi – NCR (+39%), Ahmedabad (+27%) and Kolkata (+10%) also recorded rise in net absorption of office space in the first half of the year.

The overall supply levels during H1 2016 too witnessed a drop of 7% with Bengaluru, Chennai, Delhi-NCR and Pune witnessing a slowdown in project completions.

"The first half of the year has been a mixed bag for the key markets with large volume locations like Bangalore and Mumbai seeing a drop in net absorption owing to slower take up of space by IT/ ITeS and BFSI sectors. This however is going to be only temporary as the second half looks promising. A large number of companies have committed space foreseeing limited availability of upcoming quality stock in select markets which will push up absorption in the second half of the year. These pre-commitments are bound to steer net absorption, going forward. The year began with some outright transactions that would continue in some markets,” Anshul Jain, Managing Director, India Cushman & Wakefield said.

Anshul further added, “India’s economic growth story remains strong with additional fillip coming in from the government in the form of relaxation of FDI in a number of sectors. There are a few impending changes that will be taking place on the global canvas including Presidential election in USA and exit of Britain from European Union, but India’s position will remain strong and favourable backed by the strong GDP growth sustained over the last 18 months. All this will help the office space market to remain positive for the year of 2016 with absorption levels remaining positive for the rest of the year, albeit some markets that are over supplied may still experience high vacancy” 


Bangalore recorded a decline of 34% y-o-y in H1 2016 despite a strong first three months (Jan – Mar) due to tepid net absorption in the quarter April – June 2016. The total net absorption was recorded at 4.5 msf in the first half of the year. This can be attributed to lower-than-expected level of absorption of previously pre-committed space. Delays in building completions led to restricted Grade A supply becoming operational, which contributed to a 24% drop in total supply in the first half of the year, compared the corresponding period last year.

Anshul Jain, Managing Director, India Cushman & Wakefield said,“Typically Bangalore sees a rise in activities in the latter half of the year with, though the there is no set rule of the market. The attractiveness of the market however remains strong with Indian and global companies looking at expanding their presence in the city. We expect the city to end the year with similar levels of net absorption of between 9 – 10 msf as in the previous years. We expect sectors such as IT-ITeS, e-Commerce to remain active in the city creating demand for office space.”


Chennai market saw a decline of over 50% in the first half of 2016 compared to same time last year with total absorption being recorded at just 600,000 square feet (sf) as against last years’ 1.3 msf. Demand from IT/ ITeS for space in the city was seen to be significantly lower than previous times. There was also an absence of any large space deal which generally has the tendency of pushing forth absorption levels.


Pune witnessed a drop of 41% in net absorption with total absorption being recorded at 1.9 msf. Despite a healthy absorption in the months of April – June, 2016 of 1.3 msf, characteristically low levels activity in the first three months of the year have impacted the market performance. Pune has been fraught by delayed decision making by Indian companies leaving the place to see reduced absorption activities. The supply in Pune too declined by 42% during H1 2016.


Mumbai witnessed 36% decline in net absorption to 1.3 msf in H1 2016 due to the absence of large sized deals in the market. At the same time there were higher relocation and consolidation activities which impacted the incremental space take up in this period of time. During the first half of the year, absorption activities have been concentrated in the micro markets of Thane (28%) and in Andheri-Kurla (20%) characterized by uptake of small and mid- sized companies. The supply during H1 2016 was noted to be 6% higher, as the April-June quarter saw infusion of 1.7 msf – the highest seen in 8 quarters.

Anshul Jain, Managing Director, India, Cushman & Wakefield said, The first half has been sluggish for Mumbai largely on account of low activities from demand drivers such as BFSI and IT/ ITeS that were more active in the last few years. However, the office space market was kept ticking by small to mid-sized deals which is expected to continue and make their contributions on an overall basis.”


Improving business climate and the Telangana government’s efforts to create more visibility for Brand Hyderabad led to the city witnessing a steep rise in net absorption in H1 2016 to 2.9 msf, a 55% increase from corresponding period last year. As the city continues to witness strong demand for space from IT-ITeS and technology companies, net absorption during April-June period stood at roughly 1.7 msf, of which 70% came in the form of previously recorded pre-commitments by IT-ITeS companies. Competitive rentals in the city, quality infrastructure and a proactive government have been attracting global companies to increasingly prefer to set up offices in the city. 


Delhi-NCR witnessed 2.4 msf of net absorption during H1 2016, a surge of 39% from the corresponding period last year. The increase in the overall activities was due to some large-sized deals taking place in the market. All the three zones of Gurgaon and NOIDA and New Delhi have witnessed activities during the period. However, NOIDA has seen an increased level of absorption in Q2 as compared to previous periods. During May-June quarter, NOIDA accounted for 38% of total grade A net absorption in Delhi-NCR – which is the same proportion as Gurgaon Others submarket (Sohna Road, Golf Course Road, Udyog Vihar, NH8, Golf Course Extension Road, Dhundahera, excludes Manesar). The spurt in NOIDA’s net absorption was on the back of increased take-up of space by IT-ITeS companies. Typically, Gurgaon Others submarket has been seeing heightened activity over the last few quarters.

Anshul Jain, Managing Director, India, Cushman & Wakefield said, “The interesting development to note in the NCR market is the uptake of space in NOIDA due to its price advantage. Even while Gurgaon has seen steady absorption levels, this large deal in NOIDA can be a potential precursor to the next phase of growth for this region. NOIDA has to its advantage a robust infrastructure and price competitiveness which can be pegged in competition with locations of Hyderabad and Pune.” 


Both Kolkata and Ahmedabad witnessed incremental net absorption during H1 2016. Kolkata witnessed a 10% increase in net absorption to 0.4 msf keeping the average levels of activities similar to that of last year.  Ahmedabad’s net absorption rose 27% to 0.4 msf during H1 2016. Interestingly, Ahmedabad’s saw more than a 10-fold rise in supply during H1 2016 to 2.7 msf which may create the rentals for the location to contract, as demand has historically been relegated to a between 200,000 – 500,000 sf.

[1] Ahmedabad, Bengaluru, Chennai, Delhi-NCR, Hyderabad, Kolkata, Mumbai, Pune


Sitara Achreja, Executive Director, Marketing & Communication

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