Office space absorption rose 11% to 1.38 million sq ft in Delhi-NCR during the April-June quarter. The rise is primarily driven by higher demand from the IT/ITeS sector, though rentals remain under a cloud, global property consultant DTZ said on Sunday.
However, quarter-on-quarter, the absorption actually fell by 18%.
“Office space in Delhi NCR witnessed total take-up of 1.38 million sq ft in Q2, representing a decrease of 18% q-o-q (quarter-on-quarter) but an increase of 11% y-o-y (year-on-year),” DTZ said in its report titled ‘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%) of total take-up in Q2, compared to 36% in Q1, a broad indicator that the economy is slowly coming out of the grips of a slowdown. The election of a stable government at the Centre would help matters to improve from here, experts feel.
“Delhi-NCR witnessed an increase in demand for space by ITES companies in specialised 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 100,000 sq ft accounted for 60% of total absorptions in Q2 against 26% in Q1.
“Multinationals based out of Europe accounted for 60% of demand over the quarter, which was 16% in the previous quarter. Multinationals based out of US and India contributed 10% and 11% respectively,” DTZ said.
Gurgaon witnessed a 5% 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% rise in project completions in Q2 over the previous quarter.
“New supply of 5.3 million sq ft became operational in Q2 across 13 projects in the PBD and SBD regions,” the consultant said.
Vacancy in Q2 stood at 32.6%, an increase from 28.9% 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% to overall vacancy, Gurgaon 32% and Delhi’s secondary business district (SBD) 30%.