India’s commercial real estate market is going through the phase of tremendous development. Like any other market, it goes through several peaks and troughs with time, but the overall growth pattern is commendable. According to JLL’s global market perspective for the last quarter of 2015, India saw the strongest office leasing activity in the whole of Asia Pacific Region. It contributed to more than half of Asia Pacific’s office leasing market. Delhi was the strongest contributor, followed by Mumbai and Bangalore.
As per the reports, the leasing activity performed the best in the third quarter, following a pretty consistent Q2. Gross leasing volumes were seen to rise by 27% year-on-year. After Q2, India and China were the two countries that stood strong. Increased activity was seen in the Tier I cities of both the economies including Delhi, Mumbai and Shanghai. Other markets like Singapore and Tokyo recorded a reduction in transaction volume. As for the entire year 2015, office leasing volumes are about 25% higher over 2014. A 5-10% growth is expected in 2016.
The new deliveries in 2015 were recorded at 5.7 million sq mt which is jump of whopping 70% year-on-year. 6.1 million sq mt of office space is expected to roll out for delivery in 2016.
The Demand Scenario
The global funds and cross-border Asian investors are the two main players of the office space leasing market in the Asia-Pacific Region. The transaction volumes of India have doubled in Q3- 2015 as compared to Q3-2014 and reached $1 Billion. Investors anticipate a long-term growth and impressive demographic trends in the Indian commercial market. And hence they are looking for relatively stabilised asset classes in this sector. Investment volumes in the third quarter went as anticipated so the demand dynamics seem to be pretty consistent. However, the lack of high-quality stock may stand as a constraint.
Corporate sector continues to show strong demand in the Indian commercial realty sector. Shanghai, Delhi, Mumbai and Bangalore are the main targets of corporate fund flow. Though the political instability and changes in investment regulations have led to a change in the risk-taking habits of corporate investors. They have been noticed to show some hesitancy and caution and want to put their money in the ventures after much research.
Location is one of the most important factors investors consider. Both multinational and domestic companies seek more office space to lease for their back office operations. Bangalore, Delhi and Mumbai are the three cities that seize the strongest demand from investors.
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