'Office rentals may rise 4-5% annually on good leasing demand'

Office rentals for quality space are expected to increase 4-5 per cent annually over the next three years across cities on better leasing demand despite temporary slowdown in economy, according to Colliers.

Property consultant Colliers India, in its latest report on office market, said that about 10 million sq ft of office space was leased during July-September quarter of 2017.

The gross absorption totalled around 28.9 million sq ft in the first nine months of 2017.

The consultant maintained its yearly forecast of more than 40 million sq ft of leasing for 2017 as it expects leasing momentum to pick up in the last quarter.

"Despite the temporary slowdown in the economy in the aftermath of several major government reforms executed in 2017 office market remained upbeat...," said Surabhi Arora, Senior Associate Director, Research, Colliers International India.

This was on account of increased investor activity, sustained leasing demand from technology companies and growing leasing interest from various industry occupiers like manufacturing, coworking, logistics and warehousing.

"We expect the commercial real estate market to remain on track with sustained demand from occupiers in short to medium term. Rents are likely to see an upward growth trajectory specially in Grade A buildings; average annual increase of 4-5 per cent over the next three years likely in India across cities," she said.

With a 7 per cent share of total leasing volume in July- September quarter, the report said coworking operators are making their presence felt in the market.

"Besides its cost-effectiveness and flexibility, use of coworking space is becoming more popular due to increasing uncertainty among occupiers regarding their future headcount growth," it added.

The consultant expects the coworking concept to expand in the short to medium term, notably in cities such as Mumbai, Bengaluru and Gurgaon.

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