The IT hubs have benefitted from the exponential growth of the sector and affordable rentals
As the country limps back into normalcy after multiple pandemic-induced lockdowns and curbs, the southern Indian cities seem to be leading the pack in the office market in terms of office leasing, new office competition and rental growth.
The southern triad of Bengaluru, Chennai and Hyderabad grabbed 66% or 14.06 mn sq. ft. of net absorption of 21.32 mn sq. ft. in FY21 across India’s top seven cities, says a recent Anarock Property Consultants report.
The west zone covering the Mumbai Metropolitan Region (MMR) and Pune comes a distant second at 21% or 4.56 mn sq.ft followed by north with National Capital Region (NCR) at 11% or 2.3 mn sq.ft.
The share of southern cities in net absorption has grown steadily over the years barring a marginal dip in FY19-20. In FY17-18, it accounted for 47% of the total 31.15 mn sq.ft of office spaces leased in the top seven cities. In FY18-19, it was at 57% of 35.8 mn sq.ft while in FY19-20, it captured 55% of the total 43 mn sq.ft. The western cities, on the other hand, have seen a decline in their share in the same period. NCR’s share rose in FY19-20 but saw a subsequent drop in FY21.
Explaining the southern tilt in the space, Anuj Puri, Chairman, Anarock Group, says, "The remarkable growth in the office market of these three Southern cities when viewed against their Western and Northern counterparts is directly attributable to robust demand by the IT/ITeS sector, affordable rentals, and the exponential growth of start-ups locally over the past few years.” The manufacturing and industrial sectors are also driving demand in the region, he adds.
In terms of new office supply in FY21 (40.25 mn sq. ft), cities in the south led with a 63% share while the west and north stood at 19% and 18%, respectively. Interestingly, in FY17-18, the southern and western cities were at the same level, holding 40% each of the total 32.53 mn. sq. ft.
Bengaluru and Hyderabad were the only cities that saw an increase, albeit marginal, in office rental in FY20-21 as compared to FY19-20. While the average monthly office rental in Bengaluru went up to Rs 77 per sq. ft. in FY21 from Rs 74 the year before, it went up from Rs 56 to Rs 57 in Hyderabad in the same period. The rest—Chennai (Rs 60), MMR (Rs 125), Pune (Rs 68) and NCR (Rs 78)—remained stagnant during the same time.