18th January 2017 - Office Leasing Market Snapshot - Q4, 2016 - Gurgaon
On the back of strong fundamentals in the first half of 2016, office space leasing slowed down in Gurgaon in the second half of 2016. Naturally, occupiers decelerated their take-up decisions in the last quarter of 2016 – particularly in November-December. Rentals were status quo on par with Q3, 2016. Demonetization although not having direct effects on the office leasing market may have impacted large company decision making as they rewired some of their working fundamentals to decide the way forward for the future.
Small companies showed up interestingly more so in these months, particularly from the technology segment with interest in specific localities of CyberCity, Udyog Vihar, Golf Course Road, and MG Road. Sohna road also saw some interest. Of note in terms of new buildings are JMD Megapolis on Sohna road, which both on a structural and internals front looks impressive particularly for the rental price it is commanding. I see rentals here rising as occupancy increases.
Udyog Vihar saw a 5% increase in rentals over the quarter despite less transactional activity. Smaller companies took their time over decision making and even seem to be more detailed at the time of information acquisition.
Serviced offices seem to be keen to generate deals and therein are aggressively open to negotiations on pricing. This is not surprising given the current level or rates that they are at all across the board.
Lastly, co-working seems to be the new mantra (or perhaps old wine in a new bottle as some would say) with standalone co-working hubs setting up shop adding to the supply of business centre co-working options for prospective tenants. Interestingly this is trending in other parts of the country too, particularly Bengaluru.
Activity is likely to resume in the first quarter of 2017 with the months of February and then March looking better. With limited supply coming up and demand more or less the same expected in Q1 2017 as compared to Q4 2016, I see rents remaining stable.
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