Office space absorption rose 10% in 2014: Report

Mumbai: Absorption of office space increased by nearly 10 percent in 2014 to over 33 million square feet compared to the previous year, indicating optimism in the commercial real estate market which is likely to continue in 2015 as well, according to a report.

The report by property consultant CBRE said "enhanced" levels of activity in corporate real estate transactions have led to a total office space take-up of more than 33 million square feet (sq ft) during 2014.

The demand for commercial office space was sustained throughout the year, registering an year-on-year growth of 10 percent over 2013, the report said.

This activity was led for the most part by Bangalore (37 percent) and the National Capital Region (24 percent).

During October-December 2014, total corporate space take-up was more than 9 million sq ft -- the highest quarterly levels over the past three years.

"Such transaction levels echoed the overall sense of optimism that prevailed in the Indian commercial real estate market in 2014," said CBRE South Asia Chairman and Managing Director Anshuman Magazine.

According to the report, there was significant investor interest in completed and well-leased core commercial assets and IT parks.

"This willingness to invest in the country, especially on the part of multi-national organisations, indicates an increased confidence in the India growth story in general and the government in particular," he said.

Except for Mumbai and Hyderabad, all leading cities witnessed an increased demand for office space during 2014 from corporate occupiers, the report said.

"A rationalised supply and increased focus on committing space in under-construction projects in Mumbai led to a drop in transaction activity, while a subdued political climate in Hyderabad during the first half of 2014 contributed to a similar drop," Magazine said.

Corporates preferred office districts of Gurgaon, Thane, Navi Mumbai, Whitefield (Bangalore), Magarpatta (Pune) and the IT corridor in Hyderabad, among others, the report said.

According to the report, IT/ITeS and banking and financial services dominated the office space, followed by manufacturing and engineering, telecommunications, construction, consulting and research, healthcare and pharmaceuticals.

Additionally, cities such as Delhi and Bangalore attracted a healthy demand from the e-commerce segment during the fourth quarter.

"The fundamentals are in place for the global economy to move ahead in 2015. There are signs of business conditions turning the corner and better news is anticipated ahead for India's realty sector. With the government's reform agenda beginning to build momentum, the country's economy is likely to start 2015 on a brighter note than it did the previous year," Magazine added.