MUMBAI: Around 194 million sq ft (MSF) of Grade A office space is expected to be absorbed in India's top eight cities between 2014 and 2018, said a report released by global real estate consultant, Cushman & Wakefield and Global Real Estate Institute on Friday.
This absorption is likely to increase at a compounded annual growth rate (CAGR) of 9% during the same period. The report further said total Grade A office stock across select eight cities is expected to breach the 500 msf mark by 2018 and Bengaluru would be the first Indian city to have more than 100msf of Grade A office stock by 2015.
The highest growth (10%) in new supply is expected in Pune whereas Kolkata (15%) is expected to witness the highest growth in net absorption.
Bengaluru is expected to attract significant demand over the next five years, with almost 29% share in total net absorption, followed by Delhi NCR and Mumbai with 18% and 17% share respectively. Kolkata, on the flip side, is anticipated to witness least demand among the top eight cities.
According to the report, even though overall demand is expected to outstrip supply over the next five years, the trend varies city-wise. Most cities are expected to witness demand outstripping supply, some are likely to see elevated vacancy levels owing to new supply and moderate increase in net absorption. Demand for office space in Ahmedabad, Chennai, Hyderabad, Mumbai and Pune is anticipated to outstrip supply. Chennai is expected to lead the pack with a whopping 68% gap, followed by Mumbai and Ahmedabad with 33% and 28% gap. On the other hand, Kolkata and Delhi-NCR are expected to witness higher vacancy levels as new supply is anticipated to be higher than net absorption by 44% and 9% respectively.
Mumbai is expected to witness highest appreciation in rentals amongst the top eight cities, with an average 12% appreciation in 2015 and 2016 owing to significant supply in Bandra Kurla Complex, which commands higher rents compared to other submarkets in Mumbai, it said.