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Noida Office – Transaction Volumes Picked up in 3Q 2014 – Colliers

For the first time in last four quarters, the NOIDA office market has shown an increase in absorption. Office absorption totalled approximately 0.5 million sq. ft. in the third quarter, marking this as the strongest quarter for absorption in 2014. Year to date, NOIDA has seen its office occupancy increase by almost 1 million sq. ft. Expansion and relocation by IT/ITeS companies is driving the demand. The most significant leasing transaction for the third quarter took place in Institutional Sector 62 with Samsung leasing 150,000 sq. ft. in Okaya Business Park. HCL also signed a 120,000 sq. ft. lease at NEC Technology Park, and Mediatrack took another 68,000 sq. ft. in SB tower in Sector 16A.
In a landmark deal this quarter, the NOIDA authority auctioned a 96 sq m commercial plot in commercial sector 18 at INR 8.64 lakh per totalling to INR 8 crores. The authority also auctioned nine other plots located in sectors 16, 50, 51, 40, 63 and 110. The reserve prices for these plots were fixed at INR 1.96 to 4.45 lakhs per The pace of construction in most projects remained slow. At the same time only one major project was launched in NOIDA this quarter. CBS International Projects Pvt. ltd. launched a mixed use project, “World One”, located in sector 90 along the NOIDA-Greater NOIDA Expressway. This will add a small supply of approximately 0.1 million sq. ft. to the Approximately 84% of this supply is IT/ITeS office space located in institutional sectors while the commercial sector has very limited vacant Grade A stock. The absence of new deliveries to the market helped to reduce vacancy rates marginally during the quarter.
Despite increased absorption, institutional and industrial sectors witnessed a marginal decrease in rents in the range of 1 to 3% QoQ in IT/ITeS office space as landlords offered more incentives and remained flexible in securing new tenants. However, due to the small vacant stock and limited new additional supply of commercial office space, select Grade A commercial properties witnessed a marginal increase in rents in the range of 5-7% QoQ.
Colliers View
With an overall uplift in market sentiments, tenants who were delaying their decisions to relocate or expand will start making a move. We anticipate that the rents will increase marginally in medium term. IT/ITeS will remain the market driver, while office vacancy levels are expected to remain steady until substantial employment growth returns and the overall economy improves city’s Grade A inventory by the end of 2017. Currently, there is approximately 7.7 million sq. ft. of vacant office space available for fit-out in the NOIDA market.