New office space supply nearly doubled in January-June to 23.7 million square feet in six cities due to a lower base effect and increased demand, according to Colliers.
The supply stood at 12.1 million square feet in January-June 2021 in these six cities – Bengaluru, Chennai, Hyderabad, Pune, Mumbai and Delhi-NCR.
According to the data, in Chennai, new supply increased to 4.2 million square feet in January-June 2022 from 0.4 million square feet in January-June 2021.
New supply at Delhi-NCR has grown from 1.5 million square feet to 2.4 million square feet.
Hyderabad more than tripled office supply to 6.4 million square feet in the first half of 2022 from 1.9 million square feet a year ago.
In Mumbai, new supply increased from 0.8 million square feet to 1.1 million square feet. Pune saw a multiple jump in new supply to 3.8 million square feet in January-June 2022 from 0.4 million square feet a year ago.
New supply in Bengaluru fell to 5.7 million square feet in January-June 2022 from 7.3 million square feet a year ago.
On the demand side, from January to June 2022, gross office space rental increased more than 2.5 times to 27.5 million square feet in six cities from 10.3 million square feet during the corresponding period of the previous year.
On the market, Ramesh Nair, CEO of Colliers India, said the occupying companies have ignored major uncertainties they had over the past two years and are now moving forward with major expansion plans.
“At the same time, developers are grappling with the aftermath of soaring inflation, driving up construction costs amid global supply chain disruptions in the timely sourcing of materials” , did he declare.
The combined effect of growing demand and limited new supply caused vacancy to drop for the first time in 10 quarters, Nair said.
The average vacancy rate for office space was 17% at the end of the June quarter, compared to 18% in the previous quarter.
“We could see a situation where 10-15% of planned projects could be advanced as developers explore innovative ways to overcome these challenges,” Nair said.
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