During the first quarter, 2016 witnessed the strongest leasing activity recorded in Bengaluru, Tokyo and Delhi-NCR in the Asia Pacific region. Bengaluru saw the highest leasing volumes due to big-ticket transactions, while Tokyo saw good pre-commitments on upcoming supply.
Delhi came third thanks to healthy leasing activity as also pre-committed space becoming operational. Together, Bangalore and Delhi saw gross leasing of more than 0.4 million sqm (net leasable area) in the first quarter (Bengaluru saw over 0.2 million sq.ms and Delhi-NCR saw more than 0.1 million sq.ms).
The top 7 Tier-I and Tier-II cities saw office vacancy rate of 15.9% in the first quarter of this year and the same is expected to be at 16% by the end of 2016 and 16.3% by end of 2017.
Global peak rates
Globally, 2016 is expected to represent the peak of the office development cycle with 16.8 million sq.ms of new deliveries anticipated in Tier-I cities. This is still way below the previous development peaks of 2001 and 2008.
In India, 2017 is projected to see peak of office space supply but this will still be below the peak of 2011. Inadequate ‘relevant’ supply in 2016-17 will be a limiting factor for absorption of space. The supply pipeline is expected to reduce from 2018.
This quarter did not see a Chinese city figure in the top 3 as new leasing was down in Beijing and Shanghai. However, demand for office space in China’s tier-I markets was sustained despite slowing growth. China’s slowdown has affected the resources-centric economies in some Australian cities.