Unlike the housing market which is facing a multi-year slowdown, the office segment is doing fairly well.
"Leasing activity remained strong during the quarter, with office space take-up rising by 28 per cent quarter-on- quarter to touch 10 million sq ft," CBRE said in its report 'India Office, Q2 2017'.
The report tracks eight major cities — Delhi-NCR, Mumbai, Chennai, Kolkata, Bengaluru, Pune, Hyderabad and Kochi.
CBRE noted that Bengaluru and Delhi-NCR continued to remain the key demand drivers, but Hyderabad also witnessed significant activity and overtook Mumbai.
However, office space leasing is down by 4 per cent as compared with the year-ago period.
During the first half of 2017, office space leasing was marginally higher by 2 per cent at about 18 million sq ft compared with the corresponding period of the previous year.
"Despite a dip in our GDP numbers during the March 2017 quarter, India's office market continued to witness sustained activity," said Anshuman Magazine, Chairman - India and South-East Asia, CBRE.
India's economic fundamentals remained strong with the implementation of several policy reforms including GST and Real Estate Regulation and Development Act (RERA), he added.
"Infrastructure development across major cities, growing prominence of smaller cities for corporates and overall positive sentiment are providing a further boost to the office market which has witnessed positive momentum over the past two years," Magazine said.
According to the report, office leasing continued to be driven by IT/ITeS corporates, with a share of about 36 per cent in the overall absorption. The share of other sectors such as engineering and manufacturing (19 per cent) and BFSI (20 per cent) remained almost same.
The leasing continued to be dominated by small andmedium-sized transactions. "Small-sized transactions (less than 10,000 sq ft) comprised almost 44 per cent of all the transactions reported during the quarter; with a 46 per cent share garnered by deals ranging between 10,000-50,000 sq ft".
The share of large-sized deals (over 1 lakh sq ft) dipped marginally, from 6 per cent in the previous quarter to 5 per cent. Key large-scale transactions included space take-up by leading organisations such as Qualcomm, Wells Fargo, Cognizant and Microsoft.
Apart from the usual focus on consolidation/expansion efforts, CBRE said the corporates focused on achieving flexibility as part of workplace solutions.
"Occupiers continued to future proof their portfolios and hedge against future rental escalations by pre-leasing space across various cities," the report said.
On office space supply, CBRE said that it more than doubled at 8.2 million sq ft in the second quarter of 2017 over the January-March period. Bengaluru and Hyderabad accounted for more than 60 per cent of the supply addition, followed by Pune and Mumbai.
"Sustained occupier interest resulted in rental values rising by about 2-8 per cent quarter-on-quarter across most micro-markets in the cities of Bengaluru, Hyderabad and Pune," the report said.
The rentals remained largely stable in Mumbai, Chennai, Kolkata and Kochi, while rental growth was restricted to the core locations in Delhi-NCR during the April-June quarter.