3 cities that will propel India’s office property sector this year

These cities are expected to drive strong supply and demand conditions throughout the year.

The uncertainties brought about by the pandemic for the past two years have taken their toll on India’s office market. Demand declined dramatically, construction of new supply slowed significantly, and vacancies increased to record levels. As a result, JLL says the rental growth in seven major cities slowed down considerably.

“In Pune, rents in the last six quarters have mainly remained stable since the breakout of the pandemic in Q2 2020, indicating that the market has been favourable to tenants. In 2021, the rental growth in the Central Business Districts was higher due to low vacancy, keeping the landlords at a slightly better bargaining position than Secondary Business Districts and Suburbs,” said JLL analyst Chinmayee Yelwande.

Here’s more from JLL:

The rent in East Pune, comprising Yerawada, Viman Nagar, Kalyani Nagar, Kharadi and Hadapsar micro-markets, that remained range-bound during the pandemic is expected to see higher growth owing to better demand-supply dynamics. Overall, the Pune market is expected to stay mostly neutral to landlords and tenants in the next 1-2 years, with an average annual rental growth of around 2-3%. However, the market is expected to be skewed towards landlords in the select premium office corridors in the long term.

Similar trends are observed in comparable IT-dominated Indian cities like Hyderabad and Chennai, where the market is likely to remain balanced for landlords and tenants in the near term. However, rentals in specific office corridors in the Hitec city and Gachibowli in Hyderabad and SBD OMR and PBD OMR in Chennai are likely to outperform in the medium to long term.

Rents in Delhi NCR remained under pressure during the pandemic. However, select office micro-markets like NH8 and Noida-Greater Noida expressway are likely to see better rental growth than the average city values in the medium to long term.

Medium-term outlook

The office market in India has started showing signs of recovery, with leasing activities that had slowed during 2020 and 2021 expected to pick up pace in the coming quarters. Employees are returning to offices as the third wave of Covid-19 weakens. In addition, the improving job market is expected to create demand for office spaces. 

The year 2022 is expected to see strong supply and demand conditions to be led by cities like Hyderabad, Bengaluru and Delhi. As the overall market sentiment is improving and there are decent pre-commitments in the under-construction projects, developers are prioritising project deliverables. We expect rents to be on a positive growth trajectory with healthy market fundamentals and low vacancies in key office districts.