Office Space Absorption Up 11% in Delhi-NCR

Office space absorption rose 11 per cent to 1.38 million sq. ft. in Delhi-NCR during the April- June quarter, over the year-ago period, on higher demand from IT/ITeS sector, global property consultant DTZ said.

However, the absorption fell by 18 per cent when compared with the previous quarter.

"Office space in Delhi NCR witnessed total take-up of 1.38 million sq. ft. in Q2, representing a decrease of 18 per cent q-o-q (quarter-on-quarter) but an increase of 11 per cent y-o-y (year-on-year)," DTZ said in its report 'Property Times Delhi NCR Q2 2014'.

DTZ describes take-up as floor space acquired for occupation that includes offices let to an eventual occupier and developments pre-let or sold.

IT/ITES sector was the primary demand driver, accounting for the large majority (81 per cent) of total take-up in Q2, compared to 36 per cent in Q1.

"Delhi-NCR witnessed an increase in demand for space by ITES companies in specialized domains like telecom, aviation and BFSI," DTZ said, adding that the demand is likely to grow in the second half with corporates expected to increase hiring activities given the expectation of an economic revival.

Transactions of more than a lakh sq. ft. accounted for 60 per cent of total absorptions in Q2 against 26 per cent in Q1.

"Multinationals based out of Europe accounted for 60 per cent of demand over the quarter, which was 16 per cent in the previous quarter. Multinationals based out of US and India contributed 10 per cent and 11 per cent respectively," DTZ said.

Gurgaon witnessed a 5 per cent q-o-q increase in demand for space, primarily from the IT/ITES domain. Noida and Delhi saw a q-o-q decline. "There was, however, an increase in enquiries for leasing space which are expected to close in the coming quarter."

Rentals remained stable in all the micro-markets in Q2 due to new supply.

DTZ noted that rentals are not expected to see significant growth due to the currently high vacancy levels and robust development pipeline despite expected growth in demand during the second half of this year.

On supply, DTZ said Delhi-NCR witnessed a 75 per cent rise in project completions in Q2 over the previous quarter.

"New supply of 5.3 million sq. ft. became operational in Q2 across thirteen projects in the PBD and SBD regions," the consultant said.

Vacancy in Q2 stood at 32.6 per cent, an increase from 28.9 per cent in Q1 due to addition of new space in the market. In absolute terms, vacancy in Q2 was 28.9 million sq. ft. compared to 24 million sq. ft. in the previous quarter.

Noida contributed 37 per cent to overall vacancy; Gurgaon contributed 32 per cent, while Delhi's secondary business district (SBD) contributed 30 per cent.