Increase in office space absorption in major cities of the country

In recent days, developers and builders were not very happy with how the residential real estate market moves as it showed only very meagre development. But commercial real estate has given a big relief to the developers as the office space absorption in the top eight cities of the country has increased by 32% to 17.9 million square feet in the first six months of 2015. The growing economy of the country has resulted in the increase in office space absorption. Not only have the available space been absorbed by companies and industries, but also the new office space addition increased by 20% to 21 million square feet.

More than 8 million square feet of commercial office space was absorbed in the top cities on the country thereby the first two quarters of the year 2015 recorded a significant growth in commercial real estate sector. The most performing cities in office space absorption includes Bangalore and Pune. Bangalore tops the chart with an office space absorption rate of 174% year-on-year growth in the first half of 2015. Pune follows Bangalore at the second position with 162% followed by Ahmedabad and Hyderabad. Ahmedabad recorded an increase of 59% and Hyderabad had a net absorption rate of 19%. The office space absorption rate in Chennai also witnessed an increase of 15%.

Though the year 2015 did not start well for many cities in terms of commercial real estate, the second quarter showed significant increase in office space absorption. Cities such as Kolkata, Mumbai, and Pune witnessed a decline of 33%, 6%, and 4% respectively in the year 2014 which changed considerably in the year 2015.
As the office space absorption increases, not just the rental values of space are expected to increase but the leasing activities are also about to show a significant growth. Though many companies are looking perfect office spaces to expand their facility, the rental values did not show up any major increase and remained constant all through the year 2015.

The corporate and industrial sector are in a hunt to increase their commercial space and hence the demand for office space are bound to increase in the year 2015. With such a huge demand the vacant office space decreased to 18.5, which was about 20.5% in the beginning of the year 2015. Corporate companies and industries are on the verge of expanding and relocating their office space to premium space to develop their business as the economic growth of the country is favourable to their business. The constant demand for premium space from companies reached a momentum in the year 2008 but declined in 2011, but now it is showing an upward swing in the year 2015 which is actually a good sign for developers.

The last quarter of the year 2015 is expected to show a similar demand and growth in commercial real estate with increase in demand and decrease in vacancy rate. Tis sudden increase in office space absorption can be mainly contributed to the economic growth of the country in the year 2015.