178 179
4 Overview of Office Space Market in India (continued)
Demand for office space is expected to improve in the next few years due to an anticipated improvement in India’s economy.
IT/ITES and BFSI sectors would be the primary drivers for new office space. Pharmaceutical, eCommerce and manufacturing
sectors are also expected to contribute to new office space take up. Relocations and consolidation in large offices will continue
as occupiers focus on space. Office space rentals are expected to remain largely stable in the next two years as the supply
pipeline is strong and rentals are expected to increase thereafter.
5 Outlook
Business sentiments revived significantly in 2014 due to the decisive election result favouring the growth and reform oriented
Indian Government which is led by Narendra Modi. With the Government taking various policy steps to boost the Indian
economy, the economic outlook seems positive and the real estate sector is expected to remain strong in 2015.
On top of that, the potential launch of REITs by developers and an expected reduction in interest rates by the central
bank would improve commercial office space demand going forward. The same is also expected to lead the growth in the
residential, retail and hospitality segment.
Area (million sq ft)
Source: C&W Research
Gross Absorption – 2013
Gross Absorption – 2014
Supply – 2013
Supply – 2014
Vacancy (%)
17.3%
15.4%
19.0%
26.7%
14
12
10
8
6
4
2
0
Ahmedabad
Bengaluru
Chennai
Hyderabad
Kolkata
Mumbai
NCR
Pune
16.8%
25.6%
26.4%
13.6%
Bengaluru
26%
Kolkata
3%
Mumbai
16%
Hyderabad
14%
Ahmedabad
6%
Chennai
6%
Pune
5%
NCR
24%
New Office Supply 2014 – 36.6 million sq ft
Source: C&W Research
Vacancy across the office market dropped by 0.5 percentage points from 2013 and was 18.5% as at the end of 2014. This is due
to the narrowing of the supply-absorption gap as absorption increased by 12.7%whereas supply increased by 8.7% during 2014.
