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This information was revealed by global real estate adviser DTZ recently.

Ankur Srivastava, managing director of DTZ in India comments: "The absorption figures for NCR are comparable to those of top 4 cities globally in office space absorption (2005), namely Tokyo (12.33 million sq. ft.), London (9.96 million sq. ft.), Bangalore (9.28 million sq. ft.) and Shanghai (6.83 million sq ft). However, NCR continues to lag behind the absorption levels in Bangalore of 9 million sq. ft (till Sep, 2006), which is estimated to reach 11 million sq ft by end 2006."

The office market absorption continues to be driven by the IT/ITES sector which accounts for about 59% of the total office space absorption in this quarter, followed by the back office operations of banking, financial services and insurance companies.

The notable change this quarter has been the share of Noida in total NCR absorption. Noida overtook Gurgaon in office space absorption in this quarter by accounting for almost 48% of the total absorption in NCR. This is a significant increase of Noida’s share as compared to 27% of total absorption of NCR in the first and second quarter of 2006. The primary reasons for this phenomenon were the lack of adequate commercial office supply in the Gurgaon region and the occupancy cost advantage that Noida commanded over Gurgaon.

Many corporate including IT/ITES companies were compelled to locate their offices in Noida because of the available office space in the region. Also, there has been a substantial increase in commercial rentals in Gurgaon in the past one year with the warm-shell rentals averaging around Rs 50-55 per sq. ft. as compared to Rs 35-40 in Noida, giving Noida significant cost advantage. However, the share of Gurgaon in total NCR absorption is expected to increase and be in line with trends witnessed in Q1 and Q2 as new commercial office supply enter the Gurgaon market. Gurgaon which accounted for as much as 63% of the total take up in the first six months of 2006, comprised only 29% of the total NCR absorption in this quarter.

Although Gurgaon added 1.66 million sq. ft. in the third quarter with buildings like The Statement, Vatika Towers, DLF Building -8 and Delta Square, most of the commercial space in these buildings had been pre-leased at early stage of construction.

The CBD (Connaught Place) witnessed low share of NCR absorption of only 1% due to the lack of office supply in the region. Demand for office space continues to remain strong here, however absence of any new supply has meant that vacancy rates in CBD have touched as low as 4%. In the SBD area (Saket, Nehru Place, Okhla Industrial Area and Mohan Cooperative) which accounts for 22% of the total absorption, Saket and Nehru Place accounted for a major share of the absorption. This huge increase in rentals and absorption in SBD has been primarily due to the sealing of unauthorised commercial establishments in Delhi and increased demand from the corporate sector.

According to DTZ, rising demand from corporates and IT/ITES sector has lead to a continuous increase in rental values in NCR. Rentals in CBD have averaged Rs 180 - 200 per sq. ft. and have generally increased by approx. 35%-50% as compared to last year. The average rentals in the SBD area have also increased by 30-55% as compared to last year and now prevail around Rs 150-180 per sq.ft.

Significant Leasing Transactions
- Tech Mahindra leased 150,000 sq ft in Sector-58 Noida on a bare-shell basis at Rs.18 per sq ft.
- EXL and Energizer leased 125,000 sq ft each in Sector-64 Noida at Rs.26 per sq ft (warm-shell).
- Nokia and Siemens leased 50,000 sq ft each in DLF Cyber Park, Gurgaon between Rs.45-47 per sq ft (warm-shell)
- Cisco leased 3,800 sq ft in Connaught Place for Rs.310 per sq ft (warm-shell)
- Regus leased 20,000 sq ft in Saket District Centre for Rs.100 per sq ft (warm-shell)
- ICICI Bank and Boeing each leased 14,050 sq ft in Nehru Place at Rs.155 per sq ft (warm-shell)

Future Outlook
The growing demand from the corporate sector and IT/ITES companies in India will continue to drive the demand for office space in NCR. The suburban micro markets are expected to be more active as there is limited or no future supply in CBD and SBD area. However, Noida, which accounted for almost half of the absorption in this quarter, will witness decline in its share in NCR absorption as significant commercial supply is expected in Gurgaon in the next quarter and in 2007. Also, rentals in Gurgaon are expected to stabilize as the new supply enters the market.

Greater NOIDA is likely to emerge as another IT/ITES destination within NCR as Tech Zone in Greater Noida is expected to become a major hub. Companies like Wipro and NIIT have already acquired plots for their campuses, whereas various developers have also acquired plots for developing multi-tenanted and built-to-suit IT/ITES space.

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