Flat demand keeps office rent stable in Apr-Jun even as new supply rises 32% across top 6 cities: Colliers

Average office rentals remained stable during April-June at ₹95 per square feet across six major cities as new supply rose 32%, while demand grew by a modest 2 %, according to Colliers India. Real estate consultant Colliers India released its quarterly data of six major office markets -- Bengaluru, Delhi-NCR, Mumbai, Chennai, Hyderabad and Pune -- on Wednesday.

Gross leasing of office space rose 2 % to 14.6 million square feet across top six cities during April-June, from 14.3 million square feet in the year-ago period, driven by technology, engineering and manufacturing sectors.

Chennai saw a three-fold jump in office demand, beating Delhi-NCR and Mumbai in leasing activities.

New supply of office space rose 32 % to 12.4 million square feet across these six cities from 9.4 million square feet.

Weighted average rental remained flat at ₹ 95 per square feet a month, across six cities.

Peush Jain, managing director-office services, India, Colliers, said, "While the demand improved during the quarter, supply saw significant three-fold rise year-on-year, and was at par with demand. Hence rentals largely remained steady."

As the demand improves further in coming quarters, Jain said there is a potential upside on rentals by the end of the year.

As per the city-wise data, office space leasing in Bengaluru fell 22 % to 3.4 million square feet in April-June from 4.4 million square feet in the year-ago period.

However, new supply more than doubled to 3.8 million square feet from 1.6 million square feet.

Office rent in Bengaluru rose 1 % to ₹ 91.9 per square feet a month, from ₹ 90.6 in the year-ago period.

In Chennai, the office leasing tripled to 3.3 million square feet from 1.1 million square feet. New supply jumped to 2.4 million square feet from 1 million square feet.

Office rent in Chennai grew by 2 % to ₹ 75.1 per square feet from Rs 73.4 per square feet a month.

Office leasing in Delhi-NCR was up 11 % to 3.1 million square feet from 2.8 million square feet. New supply rose 43 % to 2.1 million square feet from 1.4 million square feet.

Monthly rent in Delhi-NCR appreciated by 2 % to ₹ 94.2 per square feet from ₹ 92.4 per square feet.

In Hyderabad, the office demand fell 22 % to 1.5 million square feet from 1.9 million square feet, while new supply fell 19 % to 3 million square feet from 3.8 million square feet.

Monthly Office rent remained stable at ₹ 73.7 per square feet from ₹ 73.6 per square feet.

The gross office space leasing in Mumbai was down 41 % to 1.6 million square feet from 2.8 million square feet. New supply plunged 79 % to 0.2 million square feet from 1 million square feet.

Office rent remained stable at ₹ 140.2 per square feet from ₹ 139.9 a square feet.

In Pune, the leasing activities grew 28 % to 1.7 million square feet during April-June this year from 1.3 million square feet in the year-ago period.

New supply increased 52 % to 0.9 million square feet in the second quarter of this calendar year from 0.6 million square feet in the corresponding period of the previous year.

The average monthly office rent increased 1 % to ₹ 76.7 per square feet in April-June from ₹ 75.6 per square feet in the year-ago period.

According to Colliers, the share of space leased by coworking operators increased to 17 % from 11 % during the period under review.

Bengaluru-based managed office player Urban Vault co-founder Amal Mishra said, "corporates of all sizes have been taking office space in coworking centres and they are looking to increase the share of flex space in their overall real estate portfolio."

Flexibility to scale up and scale down business, saving of capital expenditure and avoiding hassles to manage real estate are major considerations for corporates while choosing coworking space, Mishra noted.

Gross absorption/leasing of office space does not include lease renewals, pre-commitments and deals where only a letter of intent has been signed, Colliers said.