Policy initiatives undertaken by the Government in the recent past is expected to bring transparency into the sector, which is a much-needed step towards enhancing consumer and investor confidence."

India's latest India Office MarketView Report Q4 2016, India's office market witnessed an all-time high annual absorption of over 43 million square feet in 2016, registering a growth of 9% on a year-over-year basis. The commercial real estate market in India has been performing well for the past two years. 

This is evident in the record absorption levels witnessed in 2016. India continues to show positive movement, despite global uncertainties. India Office Market Highlights (Q4, 2016)

National Capital Region

•Quarterly leasing almost doubled with Gurgaon continuing to lead leasing activity in the NCR, constituting a share of 61% 

•Rents across micro-markets remained stable with the exception of DLF Cyber City.

•Leasing activity occurred mostly in the form of small-medium sized transactions (10,000 - 50,000 sq. ft.)

Mumbai

•Transaction activity was largely stable, as compared to the previous quarter 

•Leasing activity in Peripheral markets of Vikhroli, Goregaon, Malad and Airoli accounted for almost 60% of office take up in the city 

•Rental and capital values continued to remain stable across most micro-markets 

Hyderabad

•Hyderabad, witnessed a steep rise in occupier demand, with absorption more than doubling to cross 6 million sq. ft. during 2016

•More than 80% leasing activity was concentrated in the IT Corridor

•About 2-7% rental increase reported in CBD, IT Corridor and Extended IT Corridor

Bangalore

•Rise in quarterly demand, mainly in ORR, PBD and NBD 

•Supply completion also largely concentrated in ORR, PBD and NBD; 

•Continued rental escalation across most micro-markets

Chennai

•Strong leasing activity reported in 2016, OMR Zone I and OMR Zone II contributed to over 60% of the leasing activity 

•Rentals continued to strengthen across major micro-markets; supply addition restricted to small-sized IT/ non-IT developments

Pune

•Small-to-medium sized transactions drove demand for office space

•Supply completion in the form of small to medium-sized non-IT and SEZ developments

•Rental values grew in the IT and non-IT segments across most micro-markets 

Kolkata

•PBD micro-markets of Salt Lake V and Rajarhat continued to lead leasing activity

•Rental values remained stable across all micro-markets

•Supply addition mainly in SBD and PBD

Commercial activity and occupier demand is expected to remain steady in the coming months, backed by corporates looking to expand/consolidate operations. Regulatory clearances in key locations are also likely to boost leasing activity in the coming quarters. Occupier enquiries for medium to large sized office spaces are expected to be closed in forthcoming quarters, adding to the transaction momentum. 

Due to the limited availability of ready to move in Grade A supply, occupiers with medium and large size requirements will focus on pre-commitments in under construction/built-to-suit developments across key micro-markets in the leading cities in the country. Occupiers, while expanding their footprint, are likely to keep a strong check on city infrastructure and focus on space utilization ratios and innovation in workplace strategies.

On the supply front, a significant quantum of space is expected to be released in the decentralized locations of leading cities over the next few quarters. Most of this supply is concentrated in peripheral locations of leading cities, which is likely to attract enhanced enquiries and strong pre-commitment activity in the coming months. The Government's policy initiatives (RERA and REIT), coupled with the impact of the recent demonetization drive is likely to result in the formalization and regulation of the sector. This in turn, is expected to boost transparency and investment flows into the commercial real estate sector, going forward.