The commercial real estate is gaining momentum and is witnessing healthy demand, especially in the office space segment.
This is supported by the fact that according to Cushman & Wakefield India’s recent office leasing report, ‘Commercial office market is witnessing a robust streak’. It is buoyed by optimistic prospects and strengthening business confidence given the country is one of the fastest-growing economies in the world.
As compared to figures from the previous year, office leasing registered strong gains of 15 per cent at 33 million square feet across the top eight cities of India, during January-September.
Also, provided the adequate supply in the office segment, rent drives the demand. Gurugram and Noida which comprise NCR region currently have the vacancy at about 29 million square feet which is likely to keep rentals in check. Not to forget the future supply is expected to keep pace with incremental demand, as per the report.
In the recent times, while Noida has turned into an affordable commercial real estate hub, Gurugram would continue to be the largest and most expensive office market in the NCR as per a Colliers Research report. For occupiers seeking sub one-dollar office space, Noida has been an affordable option, states the report.
The average rent that developers quote in Noida is about Rs 57 per square feet per month notes the report titled ‘Delhi, Gurgaon and Noida – The Three Aces: Key Opportunities in the NCR Office Market”.
As compared to rentals quoted by Grade A office buildings in Gurugram, the average rent in Noida as per the report is almost 35 per cent cheaper than Rs 88 per square feet per month.
For cost-conscious backend IT companies looking for affordable rents and excellent connectivity with Delhi, the Noida market has historically been the preference, notes the report.
That is evidenced by the fact that Noida accounted for roughly 29 per cent of the total demand of the overall leasing volume in the NCR over the past five years.
Further, as compared to 2017’s first quarter demand, 2018’s first quarter witnessed double the demand with one million sq ft of absorption. In the upcoming years, the city would also be host to multinationals, as per the extensive report.
For Gurugram, the report mentioned that over the past five years, it has been capturing about 60 per cent of the total regional office demand. This made many companies to shift their corporate offices from swanky localities in South Delhi and Connaught Place to Gurugram for Grade-A office spaces that offer good connectivity to the international airport as well as other business districts, and at affordable rents. This has been a trend after 2008 global financial crisis. The city has become a favourite with the corporate as the corporate expand owing to expansion of city.
The question now is whether continuous and stable demand in the commercial real estate sector can have a positive bearing on demand in the residential real estate.
Though since 2013-14, there was free fall in the residential segment, things have started settling down since the beginning of 2018, as per experts from the industry. They further state that the buyers’ confidence is still very low in the residential segment because of various issues and it will take at least two years to get back that confidence, before any substantial demand is expected.
The price in residential real estate market is not expected to increase for some time now and buyers have the requisite time to do the due diligence to choose a suitable property.