South Cities Dominate Office Leasing, 66% Share in FY21 vs 47% in FY18 | Photo Courtesy: Anarock and Wikipedia

Robust growth of IT/ITeS sector, affordable rentals & start-up boom have worked in favour of Southern office markets

 

  • Of 21.32 mn sq. ft. net absorption in FY21 across the top 7 cities, Bengaluru, Chennai & Hyderabad accounted for a 66% share, followed by West (MMR & Pune) with 21% & North (NCR) with 11%
  • Back in FY18, South cities comprised a 47% share, West – 33%, North – 17%
  • Office supply – of 40.25 mn sq. ft. of new office space completion in FY21, South cities dominated with a 63% share; West – 19%, North – 18%
  • Southern office rentals saw double-digit growth (11-15%) in this period; other regions lagged behind

 

Mumbai, 13 September 2021: The main Southern office market have overtaken other regions in terms of new supply, net absorption, and even rental growth. Among the top 7 cities, Bengaluru, Hyderabad and Chennai saw their share of total office leasing increase to 66% in FY21 (against 47% in FY18). The net office absorption in FY21 in the top cities was 21.32 mn sq. ft., and these three southern cities absorbed approx. 14.06 mn sq. ft. MMR and Pune absorbed 4.56 mn sq.ft (21%) and NCR 2.3 mn sq.ft (a mere 11% share.)

 

In FY18, 31.15 mn sq. ft. of office space were leased in the top 7 cities. Of this net absorption, the Southern cities collectively accounted for 47%, the Western region 33% and the Northern region 17%.

 

CityFY20-21FY19-20FY 18-19FY 17-18
Net Absorption in top 7 cities (mn. sq. ft.)21.324335.831.15
South Cities Share66%55%57%47%
West Cities Share21%22%25%33%
North (NCR) Share11%20%15%17%

Source: ANAROCK Research

 

In terms of new office supply too, the Southern cities continued to ramp up their share – from 40% in FY18 to nearly 63% in FY21. Of the total new office space completion of 40.25 mn sq. ft. in FY21 across the top 7 cities, the Southern cities had a 63% share (approx. 25.55 mn sq. ft.). The office supply share of the main Western markets shrank to just 19% in FY21 (from 40% in FY18.)

 

Anuj Puri, Chairman – ANAROCK Group says, “The remarkable growth in the office market of these three Southern cities when viewed against their Western and Northern counterparts is directly attributable to robust demand by the IT/ITeS sector, affordable rentals, and the exponential growth of start-ups locally over the past few years. The manufacturing and industrial sectors are also driving demand here.”

 

CityFY20-21FY19-20FY 18-19FY 17-18
New Completion in top 7 cities (mn. sq. ft.)40.2543.6843.4532.53
Share of South Cities63%59%58%40%
Share of West Cities19%16%14%40%
Share of North (NCR)18%24%19%17%

Source: ANAROCK Research

 

Rental Growth

 

Notably, between FY18 and FY21, office rentals in each of the southern cities have also shown double-digit growth. In this period, office rentals in NCR remained more or less stagnant while MMR and Pune saw a mere 2% and 8% rental growth respectively.

 

 

Avg. Office Rentals INR/sq.ft./month)
CityFY20-21FY19-20FY 18-19FY 17-18
Bangalore77747067
Chennai60605654
Hyderabad57565351
MMR125125123123
Pune68686663
NCR78787778

Source: ANAROCK Research

 

  • In Bengaluru, average monthly office rentals were INR 67 per sq. ft. in FY18 – they increased to INR 77 per sq. ft. in FY21 (up 15%)
  • In Chennai, average monthly rentals stood at INR 54 per sq. ft. in FY18 – they rose to INR 60 per sq. ft. in FY21 (up 11%)
  • In Hyderabad, average monthly office rentals rose from INR 51 per sq. ft. in FY18 to nearly INR 57 per sq. ft. in FY21 (up 12%)
  • In MMR, average monthly rentals increased from INR 123 per sq. ft. in FY18 to INR 125 per sq. ft. in FY21 (up by just 2%)
  • Pune saw average rentals rise from INR 63 per sq. ft. in FY18 to INR 68 per sq. ft. in in FY21 (up 8%)
  • In NCR, average office rentals remained unchanged in both years at INR 78 per sq. ft

 

Major Office Transactions in FY20-21
CityBuilding NameTenantMicro MarketApprox. Area(In Mn Sqft)
ChennaiEmbassy Block 3BNY MellonOld Pallavaram0.63
ChennaiBrigade WTCMckinseyOMR0.13
BengaluruPrestige StartechOla TechnologiesKoramangala0.43
BengaluruPrestige Minsk SquareAppleVasanth Nagar0.4
BengaluruGold Hill Excelsior ParkSiemens TechnologyElectronic City0.73
BengaluruBagmane RIOAmazon IndiaORR0.9
BengaluruRMZ EcospaceIntelORR0.45
BengaluruPrestige Tech ParkByjusORR0.3
MumbaiOberoi Commerz IIIMorgan StanleyGoregaon1.1
MumbaiGodrej TwoAmazon IndiaVikhroli0.26
MumbaiEquinox Business ParkTata CommunicationsLBS Marg0.26
MumbaiLiberty TowerSutherland GlobalNavi Mumbai0.13
NoidaAdvant NavisE&YNoida Expway0.15
NoidaBerger TowersThalesSector 16B0.15
GurgaonDLF DowntownSyneos HealthSector 240.21
GurgaonCandor Tech SpaceNTTSector 210.1
HyderabadDivyashree OrionWells FargoGachibowli1.3
HyderabadSalarpuria Sattva Knowledge CapitalGoogleGachibowli1
PuneSky One Corporate ParkSimpliworkNew Airport Road0.23
PuneGera CommerzoneDWF MindcrestKharadi0.28

 

 

 

 

South Cities Dominate Office Leasing, 66% Share in FY21 vs 47% in FY18