O ffice space occupiers are preparing for their employees to return to the workplace, and a large chunk of the transactions in this sector in Q3 2021 was attributed to term renewals, according to the quarterly newsletter – The Connect Q3 2021 – of commercial real estate services firm Vestian.
Analysing the office market performance of seven key cities of the country, viz., Bengaluru, Mumbai, Hyderabad, Chennai, Kolkata, NCR and Pune, and showcasing market trends along with future perspectives for the industry, it said Bengaluru continued to lead the way with 24% share of the total absorption during Q3 2021. Hyderabad reclaimed its position as one of the key contenders for IT/ITeS office demand, occupying the second spot.
Shrinivas Rao, CEO-APAC, Vestian, says “The fact that companies are planning the steady return of employees will also fortify demand for office spaces in key markets of the country.”
The preferred IT/ITeS destination of the country, Bengaluru continued to maintain its pole position amongst the key office markets.
* The total office space absorption in Bengaluru was recorded at 2.5 million sq. ft in Q3 2021, depicting a growth of 39% when compared to the absorption in Q2 2021. The previous quarter had witnessed sizeable constriction in absorption led by the severity of the second wave of the pandemic.
* The transaction activity also portended a significant improvement of 67% over the quantum of office space leased during the corresponding period in 2020.
* The office markets along the ORR accounted for majority of the transactions during Q3 2021, their share of the total absorption recorded at over 60%.
* On the other hand, in contrast to the previous quarter, new completions saw a decline of around 67% with several projects awaiting completion certificates. However, a substantial quantum of new supply is expected to become operational in the forthcoming quarter, boding well for the market.
* Weighted average rental values of grade A properties have remained fairly stable in Bengaluru office market, recording a marginal 1% growth on YoY basis.
The South Cities Report Card
* The southern cities of Bengaluru, Hyderabad and Chennai altogether accounted for 58% of the total office space absorption in Q3 2021, while their share in new completions was recorded at 45%.
* These cities offer occupiers a strong talent pool as well as quality supply within the right rental budget for IT/ITeS and other support services sectors to thrive.
* Besides robust demand, factors such as availability of large land parcels, improving infrastructure and lucrative building bye-laws have led developers to focus on commercial office projects.
* The strategy of reputed developers to strengthen their commercial real estate portfolio in these southern cities has resulted in creating a conducive and well-built ecosystem, thereby leading to an increased share of the southern markets in the pan-India scenario.
* In the forthcoming months, the southern office markets would continue to dominate, given the demand envisaged.