Despite the ongoing economic slowdown, the office space rental market in 2019 witnessed strong growth across the country. Gurugram dominated the office rental market in the National Capital Region(NCR) once again in 2019, accounting for nearly 65% of the overall transactions in Delhi-NCR. In Gurugram, 5.6 million square foot (msf) of office space was rented, followed by Noida, which saw 2.2 msf being rented. Gurugram also saw the highest annual leasing volume for the market, as per a report released by Knight Frank India, a private real estate consultancy.
A strong demand from occupiers, presence of flexible workspace players who ramped up their operations, and investment by large companies and multinationals in establishing capability sectors were some of the reasons for this growth, said experts.
Gurugram was also the preferred location for co-working occupiers. Nearly 66% of the total transacted co-working spaces was occupied in locations such as Golf Course Extension Road, Udyog Vihar and Cyber Hub, the report stated. The co-working companies also took up 1.53 msf of office space in 2019, registering a 17% growth, as compared to 2018.
According to experts, there are a number of reasons for the strong performance of the office rental space in the city. Gurugram is well connected to Delhi, close to a major international airport and has the large presence of several international companies. “The quality of office space on offer is also superlative, the floor plates are large, and the city has a better connectivity than other places in the region. Delhi, on the other hand, has older buildings, congestion and smaller office spaces. Noida and Greater Noida are coming up,” said Vinod Behl, a city-based real estate analyst.
What was surprising, however, was the reduction in the share of IT/ITeS sector in the total leasing activity in NCR. As per data, the share came down to 16% in 2019 from an already recorded low in 2018. The sector witnessed 0.88 msf of transaction activity in the second half of the year, the report stated. When asked about the sluggish growth by IT companies, Sanjay Sharma, a city-based consultant, said that the IT industry has reached a plateau. New businesses have taken their place.
{{/usCountry}}What was surprising, however, was the reduction in the share of IT/ITeS sector in the total leasing activity in NCR. As per data, the share came down to 16% in 2019 from an already recorded low in 2018. The sector witnessed 0.88 msf of transaction activity in the second half of the year, the report stated. When asked about the sluggish growth by IT companies, Sanjay Sharma, a city-based consultant, said that the IT industry has reached a plateau. New businesses have taken their place.
{{/usCountry}}Another characteristic of the market was that large-sized deals continued to dominate in 2019 with a 19% year-on-year increase on the average transacted space of 41,677 sq ft, as compared to the same period in 2018.
On the supply side, 2019 witnessed the completion of new office spaces. A total area of 12.3 msf was added to the market, matching the high of 2011. Office rent also saw a 4% increase and the average rent in the NCR stood at 86 psf per month, stated the report.
Mudassir Zaidi, executive director(north), Knight Frank India, said, “The office rental market in NCR had robust growth in 2019. While Gurugram occupied the largest share of office transactions, availability of limited spaces and high rentals in Gurugram and Aerocity allowed other locations, such as Noida, to lower prices and gain momentum. ”