Net Office Space Absorption estimated to cross 100 million sq ft by 2020
Equipment

Net Office Space Absorption estimated to cross 100 million sq ft by 2020

  • Estimated growth rate of 8 per cent YoY push up the office space absorption.
  • IT/ITeS, FinTech and eComm and BFSI expected to lead.
  • Bengaluru and Mumbai to remain highest contributors to office absorption in 2018.
  • Supply estimated at 116 million sq ft by end of 2020.

In the latest estimate by JLL, net absorption of office space is expected to cross 100 million sq ft by end of 2020 in the top eight cities of India. Office space absorption is expected to grow at approximately at a CAGR of 8 per cent over 2017. The office space market has been experiencing robust demand trends which will be fructified in the next two to three years keeping the office leasing activities buoyant and in an upward movement.

According to JLL India estimates, the net absorption for 2018 is expected to be at 30.2 msf to record a positive growth over 2017. Although the percentage increase will be moderate at about 5 per cent, it will be significant as net absorption had been witnessing year-on-year decline between the periods of 2015-2017 dropping below the psychological barriers. The next two years will see healthy increase in net absorption of Grade-A office spaces at average of 10 per cent YoY giving the office absorption market a stable momentum.

Year

Grade-A Office Absorption (mn sq ft)

Grade-A Supply (mn sq ft)

2017

28.7

26.9

2018 (F)

30.2

36.0

2019 (F)

33.6

39.3

2020 (F)

36.5

41.3









Source: JLL India

Ramesh Nair, CEO & Country Head, JLL India,
said, “The office space absorption growth is directly dependent and indicative of economic factors like the growth in GDP, access to institutional capital and stability in the market. India is on a steady rise on global charts as a business location. Demand is expected to come both from domestic as well as global companies in India. Our estimates of growth sectors impacting the office absorption for the next three years are IT and ITeS, e-commerce and related businesses, BFSI and FinTech companies and business consulting and services firms.”

The estimated net absorption for office space in the various cities for 2018 would be strong with Bengaluru expecting approximately 7-9 million sq ft of net absorption leading the volumes. Mumbai expecting to see between 6-7 million sq ft of net leasing activities in 2018. Chennai, Hyderabad and Pune will remain in the range of 4-5 million sq ft each in this year. While Kolkatacould see anywhere between 1-2 millio sq ft of office space absorption in 2018.

On the supply side, the estimated supply for the next three years is 116 million sq ft, which would also grow at a CAGR of 15 per cent from 2017-2020. This year of 2018 is expected to see a total supply of 36 million sq ft adding over 33 per cent million sq ft over 2017. Post that, supply will see a moderate growth rate of 7 per cent YoY. The surge in supply in 2018 will be the catalytic push to demand for Grade-A office space. 2017 saw a significant decline in supply leading to pent up demand which once new supply comes into the market will get absorbed maintaining the vacancy rates between 12-14 per cent on an average.

Nair further added, “The supply and absorption trends have to be seen in overall context of the market where periodically one will outstrip another to maintain a stability. The expected growth of the economy in stable manner will allow the realty market to follow a sustainable trend. A stable trend which is supported by internal factors of the economy will help in strengthening the construction sector as well which in turn feeds back to the economy.”

A stability of vacancy indicates a stability of rentals in most locations as well, we expect rentals to grow between 5-8 per cent YoY albeit only in high demand micro-markets of SBD and IT corridors of in key markets. The rest of the markets are expected to hold fort to the current values. 


Estimated growth rate of 8 per cent YoY push up the office space absorption. IT/ITeS, FinTech and eComm and BFSI expected to lead. Bengaluru and Mumbai to remain highest contributors to office absorption in 2018. Supply estimated at 116 million sq ft by end of 2020. In the latest estimate by JLL, net absorption of office space is expected to cross 100 million sq ft by end of 2020 in the top eight cities of India. Office space absorption is expected to grow at approximately at a CAGR of 8 per cent over 2017. The office space market has been experiencing robust demand trends which will be fructified in the next two to three years keeping the office leasing activities buoyant and in an upward movement. According to JLL India estimates, the net absorption for 2018 is expected to be at 30.2 msf to record a positive growth over 2017. Although the percentage increase will be moderate at about 5 per cent, it will be significant as net absorption had been witnessing year-on-year decline between the periods of 2015-2017 dropping below the psychological barriers. The next two years will see healthy increase in net absorption of Grade-A office spaces at average of 10 per cent YoY giving the office absorption market a stable momentum. Year Grade-A Office Absorption (mn sq ft) Grade-A Supply (mn sq ft) 2017 28.7 26.9 2018 (F) 30.2 36.0 2019 (F) 33.6 39.3 2020 (F) 36.5 41.3 Source: JLL India Ramesh Nair, CEO & Country Head, JLL India, said, “The office space absorption growth is directly dependent and indicative of economic factors like the growth in GDP, access to institutional capital and stability in the market. India is on a steady rise on global charts as a business location. Demand is expected to come both from domestic as well as global companies in India. Our estimates of growth sectors impacting the office absorption for the next three years are IT and ITeS, e-commerce and related businesses, BFSI and FinTech companies and business consulting and services firms.” The estimated net absorption for office space in the various cities for 2018 would be strong with Bengaluru expecting approximately 7-9 million sq ft of net absorption leading the volumes. Mumbai expecting to see between 6-7 million sq ft of net leasing activities in 2018. Chennai, Hyderabad and Pune will remain in the range of 4-5 million sq ft each in this year. While Kolkatacould see anywhere between 1-2 millio sq ft of office space absorption in 2018. On the supply side, the estimated supply for the next three years is 116 million sq ft, which would also grow at a CAGR of 15 per cent from 2017-2020. This year of 2018 is expected to see a total supply of 36 million sq ft adding over 33 per cent million sq ft over 2017. Post that, supply will see a moderate growth rate of 7 per cent YoY. The surge in supply in 2018 will be the catalytic push to demand for Grade-A office space. 2017 saw a significant decline in supply leading to pent up demand which once new supply comes into the market will get absorbed maintaining the vacancy rates between 12-14 per cent on an average. Nair further added, “The supply and absorption trends have to be seen in overall context of the market where periodically one will outstrip another to maintain a stability. The expected growth of the economy in stable manner will allow the realty market to follow a sustainable trend. A stable trend which is supported by internal factors of the economy will help in strengthening the construction sector as well which in turn feeds back to the economy.” A stability of vacancy indicates a stability of rentals in most locations as well, we expect rentals to grow between 5-8 per cent YoY albeit only in high demand micro-markets of SBD and IT corridors of in key markets. The rest of the markets are expected to hold fort to the current values. 

Next Story
Infrastructure Energy

REC Transfers HVDC Project to Power Grid

REC Limited has successfully handed over the Special Purpose Vehicle (SPV) for a High-Voltage Direct Current (HVDC) transmission project to Power Grid Corporation of India Limited (PGCIL). This strategic move aligns with the nation's objectives to strengthen its power transmission network. Key Highlights: Project Overview: The HVDC project, under the inter-state transmission system (ISTS) initiative, is a critical component of India's push toward robust and efficient electricity transmission. It aims to handle bulk power transfer across long distances while ensuring minimal losses. Role of RE..

Next Story
Infrastructure Transport

NF Railway Collaborates with IIT Guwahati

The Northeast Frontier (NF) Railway has signed strategic Memorandums of Understanding (MoUs) with IIT Guwahati to foster technological advancements and improve railway operations in the region. This partnership focuses on innovative solutions to enhance safety, efficiency, and sustainability in rail infrastructure. Key Highlights: Purpose of MoUs: The collaboration aims to leverage IIT Guwahati's expertise in technology and research for implementing cutting-edge solutions across railway operations. Key areas of focus include: Automation and digitization in maintenance. Sustainability initiati..

Next Story
Infrastructure Transport

Danapur Division Modernization Plans Revealed

The Railway Board has unveiled ambitious plans for the expansion and modernization of the Danapur Division, a critical hub under the East Central Railway. The initiative focuses on infrastructure development, enhanced passenger amenities, and operational efficiency. Key Highlights: Scope of Modernization: The Railway Board's blueprint emphasizes: Upgrading existing infrastructure to accommodate more passenger and freight traffic. Improving station facilities, such as platforms, waiting areas, and connectivity. Introducing advanced signal systems for safer and smoother operations. Freig..

Hi There!

"Now get regular updates from CW Magazine on WhatsApp!

Join the CW WhatsApp channel for the latest news, industry events, expert insights, and project updates from the construction and infrastructure industry.

Click the link below to join"

+91 81086 03000