H1 2017 RECORDS 12.5 MSF OF NET ABSORPTION LOWER BY 11% Y-O-Y; LACK OF NEW SUPPLY KEY TO LOW ACTIVITIES: CUSHMAN & WAKEFIELD
India, July 19, 2017: Total net absorption in H1 2017 (January – June 2017) closed at a deficit of 11% from the same time last year and was recorded at 12.5 million square feet (msf). Chennai was the only market among top 8 cities[1] to register a year – on – year (y-o-y) growth of over 110% in H1 2017. All other cities registered an y-o-y decline in net absorption in H1 2017 due to a slow start in Q1 2017. Of the total net absorption in H1 2017, over nearly 57% percent was recorded in the second quarter of 2017. (April – June 2017). Tapering supply has largely been responsible for the slowdown of net absorption in 2017, though there are some active enquiries by occupiers for consolidation/relocation of their office spaces hinting towards a healthy leasing activity by end of the year.
| Net Absorption (MSF) | ||||||
| Cities | Q1 2016 | Q2 2016 | Q1 2017 | Q2 2017 | % change
Q-o-Q |
% change
Y-o-y |
| Ahmedabad | 0.2 | 0.18 | 0.1 | 0.2 | 132% | -24% |
| Bengaluru | 3.4 | 1.1 | 1.2 | 2.1 | 75% | -28% |
| Chennai | 0.2 | 0.4 | 0.8 | 0.6 | -25% | 113% |
| Delhi-NCR | 0.7 | 1.3 | 0.7 | 0.9 | 31% | -22% |
| Hyderabad | 1.2 | 1.7 | 0.9 | 1.8 | 102% | -7% |
| Kolkata | 0.1 | 0.3 | 0.1 | 0.1 | -3% | -46% |
| Mumbai | 0.5 | 0.8 | 0.5 | 0.8 | 47% | -3% |
| Pune | 0.6 | 1.3 | 1.2 | 0.6 | -47% | -4% |
| Total | 7.0 | 7.1 | 5.5 | 7.1 | 30% | -11% |
Source: Cushman & Wakefield Research
Anshul Jain, Managing Director, India, Cushman & Wakefield, “Leasing activity has gathered pace in the second quarter owing to large transactions by IT-BPM and BFSI occupiers. Despite headwinds and cautious stance by IT-BPM occupiers, the IT-BPM sector continues to be the primary demand driver. Limited available of quality supply has encouraged occupiers to pre-commit office spaces resulting in a significant increase of about three times in such activity; primarily driven by IT-BPM and healthcare sectors in Hyderabad, Gurgaon and Bengaluru.”
Supply for the first half of the year recorded a decline of close to 50% as compared to last year with almost all markets experiencing a slowdown. Total supply was recorded at approximately 10 msf in H1 2017. Chennai being again the only exception to this saw an increased supply of 32% Y-o-Y. This lack of supply has been a critical reason for the slowdown in uptake of space in the first half of 2017.
| SUPPLY (in msf) | ||||||
| Cities | Q1 2016 | Q1 2016 | Q1 2017 | Q2 2017 | % change Q-o-Q | % change Y-o-Y |
| Ahmedabad | 0.8 | 1.9 | 0.5 | 0.0 | NA | -83% |
| Bengaluru | 4.2 | 0.8 | 1.5 | 2.3 | 50% | -23% |
| Chennai | 0.0 | 0.3 | 0.1 | 0.2 | 136% | 32% |
| Delhi-NCR | 2.5 | 0.2 | 0.9 | 0.7 | -20% | -41% |
| Hyderabad | 1.9 | 2.0 | 0.5 | 1.5 | 214% | -50% |
| Kolkata | 0.5 | 0.04 | 0.0 | 0.01 | NA | -98% |
| Mumbai | 0.9 | 1.7 | 0.2 | 0.5 | 114% | -72% |
| Pune | 0.9 | 1.5 | 1.0 | 0.3 | -66% | -45% |
| Total | 11.6 | 8.5 | 4.7 | 5.5 | 18% | -49% |
Source: Cushman & Wakefield Research
Anshul Jain further continued, “As the dust settles on the geo- political and economic upheavals across the world along with some ground changes such as increased supply of office space, we are expected to see a healthy net absorption of close 32 – 35 msf by end of the year. Further with a pre-commitments of close to 6 msf, we can expect the momentum of absorption to continue.”
