Office space absorption up 11% in Delhi-NCR

DTZ describes take-up as floor space acquired for occupation that includes offices let to an eventual occupier and developments pre-let or sold.

New Delhi: Office space absorption rose 11 percent to 1.38 million sq ft in Delhi-NCR during the April- June quarter, over the year-ago period, on higher demand from IT/ITeS sector, global property consultant DTZ said.

However, the absorption fell by 18 percent when compared with the previous quarter.

"Office space in Delhi NCR witnessed total take-up of 1.38 million sq ft in Q2, representing a decrease of 18 percent q-o-q (quarter-on-quarter) but an increase of 11 percent y-o-y (year-on-year)," DTZ said in its report '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 percent) of total take-up in Q2, compared to 36 percent in Q1.

"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 lakh sq ft accounted for 60 percent of total absorptions in Q2 against 26 percent in Q1.

"Multinationals based out of Europe accounted for 60 percent of demand over the quarter, which was 16 percent in the previous quarter. Multinationals based out of US and India contributed 10 percent and 11 percent respectively," DTZ said.

Gurgaon witnessed a 5 percent 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 percent rise in project completions in Q2 over the previous quarter.

"New supply of 5.3 million sq ft became operational in Q2 across thirteen projects in the PBD and SBD regions," the consultant said.

Vacancy in Q2 stood at 32.6 percent, an increase from 28.9 percent 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 percent to overall vacancy, Gurgaon contributed 32 percent, while Delhi's secondary business district (SBD) contributed 30 percent.