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Saturday, October 16th, 2021

South Cities Dominate Office Leasing, 66% Share in FY21 vs 47% in FY18

 

Robust growth of IT/ITeS sector, affordable rentals & start-up boom have worked in favour of Southern office markets

 

  • Of 21.32 mn sq. ft. net absorption in FY21 across the top 7 cities, Bengaluru, Chennai & Hyderabad accounted for a 66% share, followed by West (MMR & Pune) with 21% & North (NCR) with 11%
  • Back in FY18, South cities comprised a 47% share, West - 33%, North - 17%
  • Office supply - of 40.25 mn sq. ft. of new office space completion in FY21, South cities dominated with a 63% share; West - 19%, North - 18%
  • Southern office rentals saw double-digit growth (11-15%) in this period; other regions lagged behind

     

INVC NEWS
Mumbai,

The main Southern office market have overtaken other regions in terms of new supply, net absorption, and even rental growth. Among the top 7 cities, Bengaluru, Hyderabad and Chennai saw their share of total office leasing increase to 66% in FY21 (against 47% in FY18). The net office absorption in FY21 in the top cities was 21.32 mn sq. ft., and these three southern cities absorbed approx. 14.06 mn sq. ft. MMR and Pune absorbed 4.56 mn sq.ft (21%) and NCR 2.3 mn sq.ft (a mere 11% share.)

 

In FY18, 31.15 mn sq. ft. of office space were leased in the top 7 cities. Of this net absorption, the Southern cities collectively accounted for 47%, the Western region 33% and the Northern region 17%.

 

City

FY20-21

FY19-20

FY 18-19

FY 17-18

Net Absorption in top 7 cities (mn. sq. ft.)

21.32

43

35.8

31.15

South Cities Share

66%

55%

57%

47%

West Cities Share

21%

22%

25%

33%

North (NCR) Share

11%

20%

15%

17%

Source: ANAROCK Research

 

In terms of new office supply too, the Southern cities continued to ramp up their share – from 40% in FY18 to nearly 63% in FY21. Of the total new office space completion of 40.25 mn sq. ft. in FY21 across the top 7 cities, the Southern cities had a 63% share (approx. 25.55 mn sq. ft.). The office supply share of the main Western markets shrank to just 19% in FY21 (from 40% in FY18.)

 

Anuj Puri, Chairman - ANAROCK Group says, "The remarkable growth in the office market of these three Southern cities when viewed against their Western and Northern counterparts is directly attributable to robust demand by the IT/ITeS sector, affordable rentals, and the exponential growth of start-ups locally over the past few years. The manufacturing and industrial sectors are also driving demand here.”

 

City

FY20-21

FY19-20

FY 18-19

FY 17-18

New Completion in top 7 cities (mn. sq. ft.)

40.25

43.68

43.45

32.53

Share of South Cities

63%

59%

58%

40%

Share of West Cities

19%

16%

14%

40%

Share of North (NCR)

18%

24%

19%

17%

Source: ANAROCK Research

 

Rental Growth

 

Notably, between FY18 and FY21, office rentals in each of the southern cities have also shown double-digit growth. In this period, office rentals in NCR remained more or less stagnant while MMR and Pune saw a mere 2% and 8% rental growth respectively.

 

 

Avg. Office Rentals INR/sq.ft./month)

City

FY20-21

FY19-20

FY 18-19

FY 17-18

Bangalore

77

74

70

67

Chennai

60

60

56

54

Hyderabad

57

56

53

51

MMR

125

125

123

123

Pune

68

68

66

63

NCR

78

78

77

78

Source: ANAROCK Research

 

  • In Bengaluru, average monthly office rentals were INR 67 per sq. ft. in FY18 - they increased to INR 77 per sq. ft. in FY21 (up 15%)
  • In Chennai, average monthly rentals stood at INR 54 per sq. ft. in FY18 - they rose to INR 60 per sq. ft. in FY21 (up 11%)
  • In Hyderabad, average monthly office rentals rose from INR 51 per sq. ft. in FY18 to nearly INR 57 per sq. ft. in FY21 (up 12%)
  • In MMR, average monthly rentals increased from INR 123 per sq. ft. in FY18 to INR 125 per sq. ft. in FY21 (up by just 2%)
  • Pune saw average rentals rise from INR 63 per sq. ft. in FY18 to INR 68 per sq. ft. in in FY21 (up 8%)
  • In NCR, average office rentals remained unchanged in both years at INR 78 per sq. ft

 

Major Office Transactions in FY20-21

City

Building Name

Tenant

Micro Market

Approx. Area(In Mn Sqft)

Chennai

Embassy Block 3

BNY Mellon

Old Pallavaram

0.63

Chennai

Brigade WTC

Mckinsey

OMR

0.13

Bengaluru

Prestige Startech

Ola Technologies

Koramangala

0.43

Bengaluru

Prestige Minsk Square

Apple

Vasanth Nagar

0.4

Bengaluru

Gold Hill Excelsior Park

Siemens Technology

Electronic City

0.73

Bengaluru

Bagmane RIO

Amazon India

ORR

0.9

Bengaluru

RMZ Ecospace

Intel

ORR

0.45

Bengaluru

Prestige Tech Park

Byjus

ORR

0.3

Mumbai

Oberoi Commerz III

Morgan Stanley

Goregaon

1.1

Mumbai

Godrej Two

Amazon India

Vikhroli

0.26

Mumbai

Equinox Business Park

Tata Communications

LBS Marg

0.26

Mumbai

Liberty Tower

Sutherland Global

Navi Mumbai

0.13

Noida

Advant Navis

E&Y

Noida Expway

0.15

Noida

Berger Towers

Thales

Sector 16B

0.15

Gurgaon

DLF Downtown

Syneos Health

Sector 24

0.21

Gurgaon

Candor Tech Space

NTT

Sector 21

0.1

Hyderabad

Divyashree Orion

Wells Fargo

Gachibowli

1.3

Hyderabad

Salarpuria Sattva Knowledge Capital

Google

Gachibowli

1

Pune

Sky One Corporate Park

Simpliwork

New Airport Road

0.23

Pune

Gera Commerzone

DWF Mindcrest

Kharadi

0.28

 

 

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