Bengaluru sees highest growth in leasing of office spaces in 2019

IT, technology, e-commerce and co-working sectors drive the growth

Bengaluru, the country's technology hub, has seen phenomenal growth in the leasing of office space during 2019. The city has witnessed a healthy 15.4% growth in office space absorption at 15.6 million sq. feet in 2019 compared with 13.5 million sq. feet in 2018. The city also accounts for 27% of the total office space leased in the country during the year.

In terms of percentage growth in 2019, Hyderabad stands at the top position with a growth of 53.2% over 2018. It absorbed 9.5 million sq. feet compared to 6.2 million sq. feet in 2018. Bengaluru is followed by NCR (10.89 million sq. feet), Chennai (8 million sq. feet), Mumbai (6.9 million sq. feet), and Pune (6.8 million sq. feet) in absorption. Overall, the top six cities witnessed absorption of 57.7 million sq. feet, a growth of 22% over 2018, when they absorbed 47.3 million sq. feet.

“There is no impact of economic slowdown on the absorption of office space in top cities of the country. We have seen the growth in office space is largely driven by IT, technology and co-working segments,” Sarita Hunt, Managing Director, Bengaluru, Savills Property Services (India) Private Limited told DH.

According to an Office Market Watch 2019 report released by international property consultants, Savills India, the demand for office space in Bengaluru was driven primarily by technology, financial services, co-working and e-commerce firms. Together they constituted most of the office space absorbed during the year.

"Bengaluru has seen the highest growth in office space absorption during the decade. This scenario is likely to continue in the next few years owing to demand from IT, technology and co-working providers. We expect another 11-12 million sq. feet absorption in 2020 largely driven by co-working sector," Sarita Hunt said.

She said an estimated 15 million sq. feet space is being added over the next three years in Bengaluru.

Major transactions in 2019 include Amazon (680,000 sq. feet), Cognizant (480,000 sq. feet) Mercedes Benz (480,000 sq. feet), STT GDC India (400,000 sq. feet) and Exxon Mobile (250,000 sq. feet) among others.

In 2019, the city saw the completion of around 12 million sq. feet with majority completions being on the outer ring road, the eastern peripheral business district including Brookfield and North Bengaluru. Vacancy levels in Whitefield witnessed an increase due to significant consolidation and renewals. Demand for new completions including that in SEZs remained high. It is worth noting that the city's average vacancies had declined to alarmingly low levels in 2018.

Rents

As the availability of ready to move in Grade A office spaces remained constrained, rents witnessed a consistent increase in most micro-markets, with good quality buildings witnessing a steady upward movement. Average rentals of the peripheral north micro market have increased significantly by 25% year-on-year in 2019. In other markets like peripheral east, CBD and SBD city saw an increase in rentals by 15-20%, the report said.