Gururgam continues to remain office space hot-spot in NCR, accounts for 50% leasing

A report by a real estate consultancy said that tech companies followed by banks and financial services firms dominated the leasing of office space in Gurugram and helped it remain on top of business in Delhi and NCR.

Gurugram continued to witness strong leasing activity in the office space segment in the National Capital Region (NCR), grabbing over 50% of leasing business in the region during the quarter ending December 2018, according to a report.

According to a real estate professional, Gurugram offers quality buildings at a reasonable price, which has attracted business. (HT Photo)

The quarterly report released by real estate consultancy, CBRE South Asia, on Monday said that tech companies followed by banks and financial services firms dominated the leasing of office space in the city and helped it remain on top of business in Delhi and NCR.

In the previous quarter (July-September) too, the city had dominated office space leasing activity in the entire NCR. In the quarter ending December 2018, the findings once again reinforced the key role being played by areas such as Golf Course extension road, DLF Cyber City and Golf Course road.

Overall, 47.4 million sq ft of office space was leased in 2018 across the country, recording a 5.3% year-on-year growth. Bangalore saw the highest office space leasing activity, followed by NCR, Hyderabad and Mumbai on an annual basis.

Another significant feature was that the leasing business in Gurugram was dominated by small and medium transactions and there were few landmark deals that could impact the market. Flexible office players also added to the business, said the report.

As per the data, one medium-sized and one large-sized IT properties were delivered on Golf Course extension road. Also, three medium-sized non-IT properties came up in the city — one each on Golf Course extension road, Southern Peripheral road and NH-8 (beyond Manesar Toll). Besides, a special economic zone (SEZ) was delivered on Sohna Road.

Sanjeev Sinha, who dabbles in Gurugram real estate, says that the city offers quality buildings at a reasonable price, which has attracted business. “A number of businesses want to leverage the co-working, flexible business model as it is cost-effective and this has seen a great boom. Also, companies want to move to low-cost destinations that are reasonable and Golf Course extension road is perfect for that,” Sinha said.

Rents in Gurugram overall remained stable with office space available at ₹80 to 90 per square feet (psf) on Golf Course road in bare shell structures whereas rate rose to Rs110 to Rs120 psf in fully furnished buildings. On Golf Course extension road, the rate hovered between ₹65 to ₹80 psf depending upon the quality of construction, while rates were slightly less on Sohna road.

Ram Chandnani, managing director, Advisory & Transaction Services, CBRE India, said, “Overall, we expect infrastructure initiatives such as completion of highways and introduction of Mass Rapid Transport System (MRTS) services, etc. to influence occupier preferences and decision-making in the coming quarters. In lieu of the sunset date on SEZ benefits, we also expect the share of leasing in SEZs to rise across cities in 2019.”

The CBRE report further said that tech companies with a share of 40% led the office space take-up in the country during Q4 2018, followed by engineering and manufacturing firms at 17% and BFSI (banking, financial services and insurance) companies at 13%. Flexible space operators accounted for about 6% of quarterly leasing, taking-up space in core and secondary locations. Other sectors such as research and consulting (5%) also contributed to leasing activity.

The trend of small and medium-sized deals dominated the leasing activity this year, with about 44 deals accounting for less than 10,000 sq ft. As many as 41% deals ranged between 10,000 sq ft to 50,000 sq ft and it also depended on the type of industry which was involved. Bangalore, Gurugram and Hyderabad were the only cities that witnessed large-sized deals as tech, BFSI and engineering firms went for big spaces.

Sanjay Sharma, a real estate consultant, says that the reason for small and medium-sized deals is that companies are opting for smaller, nimble and lean offices. “The employees are connected through technology and there is less need for real estate as work is more on the go. Office space is more of a facilitator these days,” said Sharma, who thinks flexible work spaces will dominate even more in 2019.

Additionally, in wake of the approaching sunset clause (the date after which tax exemption is not available), the share of SEZ leasing rose from 23% in 2017 to 28% in 2018.