According to a study by DTZ Debenham Tie Leung, Delhi National Capital Region (NCR) in India has seen commercial Grade-A space absorption increaseby 42% in the first seven months of the year to 5.1-million sq. ft. Comparethis with absorption of 3.5-million sq. ft. for the whole of 2005.
“The office market has primarily been driven by the IT / ITES sector which accounts for about 75% of the total office absorption in NCR,” said Ankur Srivastava, Managing Director, DTZ Debenham Tie Leung India.
Numerous factors have contributed to this increasing commercial demand in the NCR region, which has edged over most Indian cities in the demand for commercial property due to its improved connectivity, better infrastructure and availability of skilled human resource. The forthcoming CommonwealthGames have seen transportation, hotel accommodation, security and all other supporting infrastructure in the region getting a boost, while the information technology (IT) market remains the highest in Delhi.
Gurgaon, one of Delhi’s four major satellite cities in the northern Indian state of Haryana, accounted for about 63% of the total absorption of commercial space with a total of 3.2-million sq. ft. in the first six months of the year. Over 4.4-million sq. ft. of office stock has been leased over the past 12-months. Due to the increased demand and shortage of supply in the short term, entals have increased by 44% in the past year in thisregion. This year notable Gurgaon transactions in Gurgaon included IBM
leasing 500,000-sq. ft., SAP leasing 100,000-sq. ft., Satyam leasing 85,000-sq. ft. and PWC leasing 75,000-sq. ft. IBM currently has a totalcommitment of about 8,00,000-sq. ft. of leased space in Gurgaon.
At the same time, the Central Business District (CBD) and Secondary Business Districts (SBD) are attracting corporates due to their improved connectivity and attractive location. The CBD (Connaught Place) with limited supply of Grade A space has itnessed absorption of only 81,800-sq ft. this year, and it is banks, financial institutions and consultancy firms with a high consumer orientation that dominate this demand. Due to limited supply and increasing commercial demand, rental values have increased by as much as 51%in the past one year, touching Rs. 250 (US $5.4) per sq. ft. in some buildings. Key leasing transactions in the past quarter included Thales taking up 12,000-sq. ft. and Times Now taking up 8,000-sq. ft.
The SBD, including Nehru Place, Basant Lok, Vasant Vihar, Saket and Bhikaji Cama Place witnessed approx. 406,850-sq. ft. of office space leased out.Because of increased commercial demand, rentals have increased substantially i.e. by as much as 60% in SBD, as well. The completion of the 200,000 sq. ft. Eros Corporate Towers has increased accommodation options in the area.
The commercial market dominated by the IT/ITES sector accounts for approximately 80% of the total commercial space absorption in India. Expected to grow by 30-35% in the next 3-5 years, it can be used as a basic benchmark for estimating the growth of commercial office space real estatesector. With a conservative average of 75-sq. ft. of office space per employee, if the IT/ITES industry adds another 1.5-million staff till 2010 (based on most consensus estimates), we have about at least a 110+ million sq. ft. of IT/ITES category space being added in the next four years. Apart from IT, there are other office demand drivers that forecast A-Grade office space demand from the top six Indian property markets (Bangalore, Hyderabad, Chennai,Mumbai-Pune, NCR and Kolkata) will be in excess of 150-million sq. ft. between 2006 – 2010.
“However, this percentage increase may not be witnessed uniformly in all the cities. Cities like Bangalore have already experienced significant absorption of IT/ITES space in the past 3-4 years.” according to Srivastava.