The office market melting pot in India

October 17, 2013 / By

Assimilation and diversity are two virtues India is known for and a glance at office leasing activity in the country in the last twenty-one months proves that this is true. Cities once known to be the long-time bases of specific occupier sectors are now experiencing a different and more divergent client patronage.

The last twenty-one months (Jan 2012-Sept 2013) have been different in some ways from what has been generally observed in the seven years up to December 2011. However, before dwelling more on this trend, let’s keep in mind that 217 million sq ft of office space was leased between 2004 and 2011, and in the twenty-one months since then another 46 million sq ft was taken up by occupiers. Of this, the share of IT-ITeS companies in total space leased across India up to December 2011 was 43% but this has now fallen to 36%. Mumbai, Pune, Kolkata, and the Delhi National Capital Region (NCR) strengthened their share of IT-ITeS leased space from 38% to 52% whereas Bangalore’s share fell to 18% from 34%.

Since January 2012, manufacturing companies have accounted for 28% of the total leased space across India, 7% more than their take-up up to December 2011 with Bangalore turning out to be the dark horse in this contest, leasing 41% of its space to this sector, and relegating the IT-ITeS sector to second spot and 35% of the city’s take-up. Prior to January 2012, the share was IT-ITeS 44% and manufacturing 26%.

Occupiers have trodden a different path of late by choosing cities that have not historically been known to house particular sectors. Mumbai has attracted more IT-ITeS companies than anyone imagined likely, Pune’s dependence on IT-ITeS has fallen from 59% to 45% and Hyderabad has been first choice for healthcare, biotech, telecom, and construction companies, which together have taken up 28% of the total space leased in the city (up from 12% up to December 2011). This improved Hyderabad’s share to 16% (up from 8%) of total space leased across India for these sectors. More consultancy companies moved to NCR and the Banking, Finance and Insurance sectors (BFSI) re-asserted its faith in Mumbai and added Pune to its preferred destinations.

So, are the developers responding by aligning their supply to this trend? Since January 2012, the vacancy rate in IT Parks-SEZs in Mumbai has fallen to 24% from 29% while that in non-IT buildings has risen from 16% to 21%.This trend may continue as by December 2015 another 13 million sq ft of non-IT office space will hit the market contrasting with just 6 million sq ft in IT Parks-SEZs. IT Parks can host non-IT occupiers to a certain extent, but IT occupiers have to operate from IT Parks-SEZs for business efficiency. This is diversity of a different kind!

Inline Feedbacks
View all comments

Talk to us 
about real estate markets.