The top seven cities as per the report are Bengaluru, Hyderabad, Pune, Mumbai Metropolitan Region (MMR), Delhi NCR, Kolkata and Chennai
If you are planning to hire offices in any of the metro cities, it might create a bigger dent in your budget. Real estate demand, especially for office spaces, is on the rise. JM Financial says that the rent across metro cities is up 5.1 per cent in Q4 of FY24. This is primarily driven by parity in demand and supply. The top seven cities as per the report are Bengaluru, Hyderabad, Pune, Mumbai Metropolitan Region (MMR), Delhi NCR, Kolkata and Chennai. Majority of these cities have witnessed a surge in rents however, the rentals in Bengaluru were stable on a quarterly basis and it is even expected that going forward it will remain the same.
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In MMR, overall city-wide market rentals slightly increased to 6.0 per cent YoY and 4.3 per cent QoQ while In Delhi NCR, the incline was 3.8 per cent YoY and only 0.6 per cent QoQ. When it comes to Pune, rent was stable and is expected to be range-bound in the upcoming quarters. For Chennai, it marginally increased across most markets. Meanwhile, rents in Kolkata were largely unchanged, though rental growth was observed in Salt Lake Sector V and Rajarhat micro-markets.
Similarly, the leasing of office space in all these seven cities too witnessed an upsurge as in Bengaluru, the net absorption significantly increased QoQ to 6.7msf in Q4 FY24, led by significant activity from global capability centres. The MMR also experienced an incline as it was up 57 per cent YoY, however a decline of 8 per cent QoQ in Q4 FY24.
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For Delhi NCR, gross leasing was flat YoY while 21 per cent decline QoQ in Q4 FY24. Interestingly, fresh leases in Delhi NCR accounted for majority of the demand, holding a share of 70 per cent, followed by pre-commitments and term renewals with 25 per cent and 5 per cent share respectively. The demand for office spaces in Kolkata during the same quarter was subdued 66 per cent YoY and 52 per cent QoQ.
Due to a slowdown in the CRE decision making process among key tenant occupiers, gross leasing in Pune stood at 1.2msf in Q4 FY24. Additionally, gross leasing in Hyderabad during the same quarter came in at 2.5msf. Chennai’s Suburban South micro-market area leads the city in office leasing space with 43 per cent share. The gross leasing of the city stood at 1.7msf.
Furthermore, post Covid-19 outbreak, the office sector was impacted by higher exits, largely led by space rationalisation carried out by IT/ITeS companies. Net leasing for the office REITs had turned positive in Q4 FY24. It is further believe by the REIT managers that the buoyancy in demand will continue into FY25 and will now aim to achieve portfolio wide occupancies of over 90 per cent by end-FY25.
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What about supply?
When it comes to supply Bengaluru in Q4 FY24 added Grade-A office inventory, lower than the record completions seen in the previous quarter. Hyderabad in the same quarter added 2.9msf of new supply, that is a decrease of 36 per cent QoQ, while for FY24 supply stood at 14.7msf.
Mumbai too had new additions majorly in Andheri-Kurla and Malad-Goregaon micro-markets. For Delhi NCR, new supply is expected to enter the market by Dec’24 with 60 per cent concentration in Gurgaon and the rest 40 per cent in Noida Expressway.
Most of the upcoming supply in Pune is expected in the SBD East with 55 per cent, CBD with 39 per cent. For Chennai, 83 per cent of the new supply concentrated in the Suburban South submarket. With the occupation certificate of an under-construction project at Salt Lake Sector V getting delayed, Kolkata saw no new supply in Q4 FY24.
