Bengaluru, Hyderabad and Chennai dominate office leasing with 66% share in FY21

According to a report by Anarock Research, the net office absorption in FY21 in the top cities was 21.32 million sq ft, of which the three southern cities absorbed around 14.06 million sq ft.
Building housing corporate offices
Building housing corporate offices
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The office market in south India has overtaken other regions in terms of new supply, net absorption, and even rental growth. Among the top seven cities, Bengaluru, Hyderabad and Chennai saw their share of total office leasing increase to 66% in FY21 (against 47% in FY18), as per a report by Anarock Research. The net office absorption in FY21 in the top cities was 21.32 million sq ft, and these three southern cities absorbed around 14.06 million sq ft

In FY18, 31.15 million sq ft of office space was leased in the top seven cities. Of this net absorption, the southern cities collectively accounted for 47%, while the western region accounted for 33% and the northern region accounted for 17%. In terms of new office supply too, the southern cities continued to ramp up their share – from 40% in FY18 to nearly 63% in FY21. Of the total new office space completion of 40.25 million sq ft in FY21 across the top seven cities, the southern cities had a 63% share (approx. 25.55 million sq ft). The office supply share of the main western markets shrank to just 19% in FY21 (from 40% in FY18).

Notably, between FY18 and FY21, office rentals in each of the southern cities have also shown double-digit growth. In this period, office rentals in the National Capital Region (NCR) remained more or less stagnant while MMR (Mumbai Metropolitan Region) and Pune saw a mere 2% and 8% rental growth respectively, the report adds. 

In Bengaluru, average monthly office rentals were Rs 67 per sq ft in FY18, which increased to Rs 77 per sq ft in FY21 (up 15%). In Chennai, average monthly rentals stood at Rs 54 per sq ft in FY18, which rose to Rs 60 per sq ft in FY21 (up 11%). In Hyderabad, average monthly office rentals rose from Rs 51 per sq ft in FY18 to nearly Rs 57 per sq ft in FY21 (up 12%). 

Some of the major office transactions in FY20-21 in the southern cities include the Embassy Block 3 rented by BNY Mellon in Old Pallavaram and Brigade WTC by Mckinsey on OMR in Chennai. In Bengaluru, the transactions included Prestige Startech by Ola in Koramangala, Bagmane RIO by Amazon India on ORR, RMZ Ecospace by Intel on ORR and Gold Hill Excelsior Park by Siemens in Electronic City. In Hyderabad, major transactions included Divyasree Orion by Wells Fargo in Gachibowli and Salarpuria Sattva Knowledge Capital rented by Google in Gachibowli. 

"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 startups locally over the past few years. The manufacturing and industrial sectors are also driving demand here,” said Anuj Puri, Chairman, Anarock Group. 

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