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Chennai was the only city to see positive trends in net absorption as well as supply. Total absorption by end of 2017 expected to be at 32-35 million sq ft; pre-commitments recorded at 6 million sq ft in H12017. Total net absorption in H12017 (January-June 2017) closed at a deficit of 11 per cent from the same time last year and was recorded at 12.5 million sq ft. Chennai was the only market among top 8 cities[1] to register a YoY growth of over 110 per cent in H12017, as per data from Cushman & Wakefield. All other cities registered an YoY decline in net absorption in H12017 due to a slow start in Q12017. Of the total net absorption in H12017, over nearly 57 per cent was recorded in the second quarter of 2017 (April-June 2017). Tapering supply has largely been responsible for the slowdown of net absorption in 2017, though there are some active enquiries by occupiers for consolidation or relocation of their office spaces hinting towards a healthy leasing activity by end of the year. > Anshul Jain, Managing Director, India, Cushman & Wakefield, says 鈥淟easing activity has gathered pace in the second quarter owing to large transactions by IT-BPM and BFSI occupiers. Despite headwinds and cautious stance by IT-BPM occupiers, the IT-BPM sector continues to be the primary demand driver. Limited available of quality supply has encouraged occupiers to pre-commit office spaces resulting in a significant increase of about three times in such activity; primarily driven by IT-BPM and healthcare sectors in Hyderabad, Gurgaon and Bengaluru.鈥� Supply for the first half of the year recorded a decline of close to 50 per cent as compared to last year with almost all markets experiencing a slowdown. Total supply was recorded at approximately 10 million sq ft in H12017. Chennai being again the only exception to this saw an increased supply of 32 per cent YoY. This lack of supply has been a critical reason for the slowdown in uptake of space in the first-half of 2017. > Jain further continues, 鈥淎s the dust settles on the geo-political and economic upheavals across the world along with some ground changes such as increased supply of office space, we are expected to see a healthy net absorption of close 32-35 million sq ft by end of the year. Further with a pre-commitments of close to 6 million sq ft, we can expect the momentum of absorption to continue.鈥� H1 city-specific office trends Hyderabad: Net absorption doubled; transactions by BFSI occupiers increased In the last two years, Hyderabad has seen a growth story with the city performing well in a lot of aspects. The availability of talent, good infrastructure, and a stable government are lifting business sentiment and driving companies to set up offices and expand. Net absorption doubled in Hyderabad over the quarter at 1.8 million sq ft. Large transactions (100,000 sq ft and above) increased significantly by 49 per cent over the quarter led by BFSI and IT-BPM occupiers. Although majority of leasing activity was noted by IT-BPM occupiers, leasing by BFSI occupiers increased by 58 per cent compared to previous quarter. Foreseeing limited availability of space and rental escalations, there have been consistent pre-commitments since last eight quarters. The quarter noted pre-commitments of 1.3 million sq ft by IT-BPM occupiers. Supply improved significantly at 1.5 million sq ft compared to 0.5 million sq ft last quarter, majority concentrated in Madhapur and mainly in IT-SEZ developments. Going forward, the city is set to outperform the rest of India, with rents in this market expected to rise over 25 per cent through 2019 on the back of robust take-up levels. Additionally, companies are drawn to Hyderabad鈥檚 affordability compared to Bengaluru and other tech cities. Occupancy costs are about 25 per cent lower compared to Bengaluru and are expected to remain in the range of 20-25 per cent, even as rents set new records until 2020-2021. While Bengaluru remains the main hub for BPO and information technology (IT) industries, the volume of new supply is set to decline in Bengaluru and thus limit future take-up levels. Veera Babu, Managing Director, Hyderabad, Cushman & Wakefield, says, 鈥淗yderabad has certainly turned the corner over the last two to three years. Pro-industry policies, addressing necessities like power, water, housing, and infrastructure and streamlining approvals processes etc. suggest a positive change. We expect a total of 35+ million sq ft of new office projects to be completed over the next three to four years.鈥� Bengaluru: Leasing activity of non-IT-BPM occupiers increase Net absorption increased by 75 per cent over the quarter and was noted at 2.1 million sq ft in Q2 owing to a number large transactions (100,000 sq ft and above) by IT-BPM occupiers. Interestingly, the share in leasing activity by non-IT-BPM sectors increased significantly to 50 per cent from 24 per cent in Q1 led by e-commerce and BFSI occupiers. Despite 2.3 million sq ft of new supply completed in Q2, vacancy levels remain slightly below 8 per cent and occupiers in Healthcare and IT-BPM sectors continue to pre-commit spaces. Chennai: Demand from IT-BPM occupiers continued to be bouyant Net absorption declined by 25 per cent over the quarter and was noted at 0.6 million sq ft. Demand continued to be led by IT-BPM sector at 65 per cent of total leasing activity. New completions improved to 0.24 million sq ft, doubling over the previous quarter. The forthcoming quarter is expected to witness 1.1 million sq ft of new supply, primarily in South Chennai. About 40 per cent of this upcoming supply will comprise of IT-SEZ developments, 80 per cent of which is pre-committed, indicating the buoyant demand for IT-SEZ space in the city. Vacancy rates were recorded at 9.3 per cent, recording a marginal decline owing to limited availability of space amid steady occupier demand. Mumbai: Thane-Belapur road continues to see heightened demand Net absorption witnessed strong growth of 47 per cent over the previous quarter to 0.8 million sq ft, despite the absence of large transactions as most were restricted upto 50,000 sq ft. The rise in net absorption was mainly led by heightened activity in the submarket of Thane-Belapur Road, which saw increased demand from IT-BPM, BFSI and consulting occupiers. The submarket also high pre-commitments of nearly 0.6 million sq ft during the quarter from IT-BPM and BFSI occupiers. New supply doubled to 0.5 million sq ft; comprising of IT developments. Overall vacancy levels marginally declined and stood at 15.2 per cent. Pune: Notable space pre-commited by IT-BPM and e-commerce occupiers Net absorption dipped significantly by 47 per cent over the quarter to 0.6 million sq ft due to limited supply addition of 0.3 million sq ft, a 66 per cent decline from the previous quarter. Pre-commitments noted during the quarter stood at 0.26 million sq ft by e-commerce and IT-BPM occupiers. Ahmedabad: Decline in overall vacancy level owing to increase in absorption and no new supply Net absorption was recorded at 0.2 million sq ft during the quarter, increasing significantly over the last quarter. Majority of the net absorption was noted in the submarkets of Satellite or Prahladnagar (40 per cent) and SG Highway (34 per cent). SG Highway continued to contribute to majority of the leasing activity; wherein IT-BPM companies accounted for 24 per cent of the total leasing. Overall vacancy levels declined by 1.0 percentage point from previous quarter and stood at 24.8 per cent owing to increase in absorption and no new supply. Delhi-NCR: Gurgaon continues to see majority activity The city witnessed a sharp increase of 31 per cent in net absorption at 0.9 million sq ft in Q2. Gurgaon continues to constitute majority share (70 per cent) in net absorption. However, leasing activity in Noida saw notable increase over the quarter led by IT-BPM sector. The sector constituted majority share of 34 per cent in overall leasing followed by consulting at 12 per cent, engineering and manufacturing at 9 per cent. Co-working space providers also had a 7 per cent share in total leasing in the NCR. The non-CBD markets of Gurgaon observed the only supply addition of 0.7 million sq ft during the quarter, 20 per cent lower than the previous quarter. Healthy absorption levels and limited infusion of supply resulted in marginal decrease in vacancy levels by 0.4 percentage points to 27.3 per cent. The quarter noted significant increase in pre-commitments at 1.2 million sq ft by IT-BPM occupiers in Gurgaon. Kolkata: Adequate availability prompts lease renegotiations in Salt Lake High vacancy levels of around 30 per cent has limited the infusion of new supply, which stood at just 14,000 sq ft in Q2. Net absorption in the city has been declining too over last four quarters and was noted at 0.1 million sq ft depicting a 3 per cent quarterly decline. Adequate availabilities at competitive rents have prompted occupiers, who are locked-in at higher rentals, to renegotiate their existing rentals or explore alternative spaces in the Salt Lake submarket.