Delhi (NCR) Office Market Snapshot 2013 Report

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Information about Delhi (NCR) Office Market Snapshot 2013 Report
Real Estate

Published on January 21, 2014

Author: colliersinternational2011

Source: slideshare.net

Description

HIGHLIGHTS

• In 2013, Delhi NCR witnessed approximately 8.31 MN SF of commercial space lease absorption 22% up from previous year.
• Within Delhi NCR, 70% of the space was leased in Gurgaon, 23% in NOIDA and the remaining 7% in Delhi.
• A number of large deals included developer’s committing to hard options to accommodating new and existing occupier expected growth requirements.
• In 2014, sentiment will remains cautious, despite robust absorption in 2013.
• Gurgaon is expected to witness a lot of lease renewals in 2014 and 2015.

Delhi - NCR Office Market Snapshot 2013

Delhi - NCR Office Market Snapshot 2013 Quarter-on-Quarter Absorption Highlights In 2013, Delhi NCR witnessed approximately 8.31 MN SF of commercial space lease absorption. Unlike other major Indian cities, the cumulative new office space leases were 22% more than the previous year. A number of large deals included developer’s committing to hard options to accommodating new and existing occupier expected growth requirements. Despite better absorption rates, there was almost no new commercial project launches from the major developers, who preferred to start residential projects over commercial developments. 3.0 2.71 2.31 2.4 IN MN SF AVERAGE ABSORPTION 1.65 1.64 1Q 1.8 2Q 1.2 0.6 0.0 Demand 3Q 4Q Industry Wise Absorption Within Delhi NCR, 70% of the space was leased in Gurgaon, 23% in NOIDA and the remaining 7% in Delhi. Most tenants were cost conscious and looked at ways to reduce their potential occupancy costs. Thus in other markets, relocation and consolidation were the primary demand generators for office space. Compared to the previous years, most landlords were willing to provide greater incentives to occupiers. The average ticket size of the deals was approximately 34,000 SF around 30% more than the last year figure of approx. 26,000 SF Others 15% Telecom 3% Manufacturing 5% 1 IT/ITeS 52% 3 BFSI 11% Approximately 26% of the total absorption of more than 31 MN SF across top 6 cities was contributed by NCR. IT/ITeS remained the major occupiers, contributing 50% of the total absorption. This was followed by Engineering and BFSI, together accounting for 25% of the total absorption. Engineering 14% 2 Top 10 Transactions of the Year Client Developer / Landlord Accenture Infospace IT SEZ Unitech Ltd. 810,000 Sector 21, Gurgaon 3Q Aon Hewitt Unitech Infospace Unitech Ltd. 800,000 Sohna Road, Gurgaon 3Q Samsung Engineering Plot No. 2A Individual 500,000 Sector 126, NOIDA 2Q Convergys Bestech Towers Bestech Ltd. 227,320 Sohna Road, Gurgaon 2Q Cairn Energy DLF Atria DLF Ltd. 204,000 NH-8, Gurgaon 1Q American Express Building No. 5 DLF Ltd. 200,000 Cyber City, Gurgaon 1Q Fiserv DLF IT Park DLF Ltd. 200,000 Sector 62, NOIDA 1Q TCS Green Bouleward The 3C Company 150,000 Sector 62, NOIDA 2Q ZS Associates DLF Worldtech Silokra DLF Ltd. 132,000 NH-8, Gurgaon 4Q Equant Solutions 1 Building Name DLF Cybercity DLF Ltd. 125,125 Cyber City, Gurgaon 4Q Area (In SF) Delhi - NCR Office Market Snapshot 2013 | Colliers International Location Transaction Quarter

Supply & Vacancy New office inventory was close to 6.44 MN SF during 2013. Of the total new space added to the stock in 2013, only 12% was located in Delhi and the remainder was evenly split between peripheral micro markets of NOIDA and Gurgaon. The current overall vacancy is 19%, which is marginally higher than that recorded at the same time in 2012 (18.5%). New Supply, Absorption & Vacancy 12 21% 10 18% 15% 8 12% Rental & Capital Values There was a marginal 3% Year-on-Year decrease in rentals in Delhi, while Gurgaon and NOIDA witnessed stable rental values during 2013 baring few micro markets such as Cyber city in Gurgaon and sector 18 in NOIDA which witnessed an increase of 7% and 2.5% respectively, on Year-on-Year basis. 6 9% 4 6% 2 3% 0 2010 2014 Prognosis The sentiment remains cautious, despite robust absorption in 2013. There is limited new stock that will be ready for fit outs in 2014 and we expect much of it to be deferred to the year after. On the other hand Delhi corporates are expanding and opening offices in Delhi due to availability of trained human resources, proximity to the central government and reasonably priced real estate. Due to the above, average rental values in Delhi NCR will remain stable and vacancy rate will fall marginally. Gurgaon is expected to witness a lot of lease renewals in 2014 and 2015, as companies that set up offices in 2004 - 06 (the “first wave” of occupiers) approach the end of their lease terms. These companies face a substantial differential between their current contractual rentals and the prevailing market rentals at which the new lease is likely to be signed. These companies will need to choose between staying in their current location at higher rentals and relocating to peripheral micro-markets offering cheaper rentals. Gurgaon will thus witness further segmentation of micro-markets in cost terms in 2014. As most of the new supply is expected in NOIDA, the rental values will be under downward pressure. Locations such as the NOIDA Expressway may buck the trend as corporate prefer to locate along this stretch which offers superior infrastructure and quality of buildings. Unless circle rates are rationalized, the sale market in Delhi will remain stressed. As in 2013, sales volume of commercial space in Delhi will remain low. 2 Delhi - NCR Office Market Snapshot 2013 | Colliers International 2011 2012 New Supply (In MN SF) 2013 2014 F Absorption (In MN SF) 2015 F 0 Vacancy (In %) Average Rentals Trends & Forecast 300 FORECAST 240 180 120 60 0 2008 2009 2010 Delhi 2011 2012 Gurgaon 2013 2014 F 2015 F NOIDA

Primary Authors: 62 countries on 6 continents United States: 140 Canada: 42 Latin America: 20 195 EMEA: 85 $2 Surabhi Arora Associate Director | Research +91 124 456 7500 surabhi.arora@colliers.com Amit Oberoi National Director I Valuation & Advisory Services & Research Sachin Sharma Assistant Manager I Research For Office Services: George McKay South Asia Director I Office & Integrated Services george.mckay@colliers.com billion in annual revenue Vikas Kalia National Director I Office Services vikas.kalia@colliers.com 1.12 Ajay Rakheja Director I Office Services ajay.rakheja@colliers.com 13,500 Technopolis Building, 1st Floor, DLF Golf Course Road, Sector 54, Gurgaon - 122 002 TEL +91 124 456 7500 billion square feet under management professionals About Colliers International Colliers International is a global leader in commercial real estate services, with over 13,500 Corporation, Colliers International delivers a full range of services to real estate users, owners and investors worldwide, including global corporate solutions, brokerage, property and asset management, hotel investment sales and consulting, valuation, consulting and appraisal services, colliers.com Copyright © 2013 Colliers International. ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.

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