Average rents in Gurgaon's office market are expected to remain stable in 2017. Demand is projected to strengthen from the technology and banking sectors. Significant new supply coming online will help keep prime area rents in check, while submarkets like Golf Course Extension Road may see a 2-5% correction. Demand was strong in Q1 2017 especially from IT/ITeS firms, though overall leasing volume declined slightly year-over-year. New completions were concentrated on Golf Course Extension Road, with more supply slated for delivery there and along NH8 by year-end. Vacancy rates may rise slightly due to new inventory, and occupiers are considering more affordable areas as well.

1. Average rents to
remain stable
Surabhi Arora Senior Associate Director |
Gurgaon
We expect demand to strengthen in coming quarters
driven mainly by technology and banking, financial
services and insurance (BFSI) firms. Amid high rents
and low vacancy, occupiers based in preferred
locations such as Cyber City and Golf Course Road
are evaluating whether to renew their existing leases
or to relocate to inexpensive locations such as Golf
Course Extension Road and along the NH8.
Significant new supply over 2017 should keep rents
in check in prime locations, while high-vacancy
markets such as Golf Course Extension Road may
see downward pressure on rents.
Forecast at a glance
Demand
Likely to strengthen in the coming quarters
driven mainly by technology majors and
financial services firms
Supply
About 2.4 million sq ft (222,967 sq m) is
scheduled for completion in 2017 but we
expect it to get deferred to 2018
Vacancy rate
Overall vacancy levels may inch up on
Golf Course Extension Road if new supply
is added to the total stock
Rent
Average rents are likely to remain stable
given high new supply; Golf Course
Extension Road may see a correction in
the range of 2% to 5%
Price
We expect capital values to remain largely
stagnant; owing to recent demonetisation,
retail investors are likely to stay away from
strata-tilted buildings
Demand from technology sector
bounces back
During Q1 2017, office sector demand in Gurgaon
remained in line with the prior-quarter numbers. The
gross leasing volume reached about 0.84 million sq ft
(78,038 sq m), down by 11% compared to Q4 2016. We
also recorded 0.75 million sq ft (72,000 sq m) of pre-
commitments in the under-construction buildings,
indicating healthy demand in the Gurgaon market.
Demand from Information Technology and Information
technology enabled services (IT-ITeS) revived in Q1,
2017 and the sector shared 53% of overall leasing
volume in Q1 2017 versus 32% in FY 2016. Apart from
this, the Banking, Financial services and Insurance
(BFSI) sector, coupled with engineering and consulting
firms looking to expand or enter the market, leased
smaller office spaces that formed the bulk of
transactions.
In Q1 2017, DLF Limited has confirmed the sale of a
40% stake in DLF Cyber City Developers Ltd. to GIC
Pte. Ltd. The sale is likely to fetch about INR 140 billion
(USD 2.18 billion) for DLF, which may use the funds to
reduce debt. We expect institutional investors to remain
bullish on acquisition of grade A leased assets.
However, the lack of quality non-strata-titled buildings
will probably keep investment low in the sector.
Rental Values
Micromarkets Rental
Values1
q-o-q
Change
y-o-y
Change
MG Road 105-125 -8% -8%
Golf Course Road 105- 175 -2% 2%
Institutional Sectors
(Sector 44, 32 and 18)
60 - 90 0% 0%
Golf Course Extension /
Sohna Road
55 - 75 -7% -4%
National Highway 8 50 - 130 0% 0%
Udyog Vihar and
Industrial Sectors
30 - 45 0% 0%
Manesar 38 - 45 0% 0%
DLF Cyber City (IT) 110 -115 0% 7%
Source: Colliers International India Research
1
Indicative Grade A rentals in INR per sq ft per month
Colliers Quarterly
GURUGRAM (GURGAON) | OFFICE
13 April 2017

2. 2 Colliers Quarterly | 13 April 2017 | GURUGRAM (GURGAON) | OFFICE | Colliers International
Udyog Vihar and Sohna Road remained the most
popular micromarkets, representing 36% and 15%
respectively of total office absorption. The popularity of
these areas indicates an increased inclination towards
cost effectiveness among corporate occupiers. Cybercity
and MG Road constitute about 8% and 5% of overall
demand. We expect the share of centralised locations to
reduce further in coming quarters as a few companies
whose leases are expiring are looking to relocate to
other alternative locations due to limited choice of
premises and high rents.
Due to metro connectivity, Golf Course Road and
Extension Road should attract occupiers' interest, while
traditional micromarkets such as Udyog Vihar and NH8
should continue to gain traction due to locational
advantages and affordable rents.
Gross Office Absorption in million sq ft
Source: Colliers International India Research
New supply to remain concentrated
on Golf Course Extension Road
During Q1 2017, 1.1 million sq ft (102,193 sq m) of new
supply was released into the market, mainly on Southern
Peripheral Road and Golf Course Extension Road. Major
completions included Enovation Centre in Sector 75,
which added over 0.55 million sq ft (51,096 sq m), and
GoodEarth Business Bay in Sector 58, which contributed
another 0.35 million sq ft (32,516 sq m). In addition, two
smaller buildings, Novus Tower in Sector 18 and Reach
Commercial in Sector 71, added 0.42 million sq ft
(39,019 sq m) to the total stock.
Significant supply is scheduled for completion in coming
quarters, mainly in the Golf Course Extension Road and
NH-8 micromarkets. Special Economic Zone (SEZ)
supply equating to 1.2 million sq ft (111,483 sq m) is due
to be delivered by the end of 2017 on Golf Course
Extension Road. This new supply is likely to draw the
attention of large IT occupiers due to low vacancy in
other SEZs.
Vacant stock amounting to 8.7 million sq ft (808,256 sq
m) was available for lease in Q1 2017, recording a 3%
drop q-o-q. Udyog Vihar and Golf Course Extension
Road had the maximum concentration of available stock,
at 30% and 18% respectively.
High rents likely to push occupiers
to emerging corridors
Due to enhanced competition from emerging corridors,
landlords in centralised locations have become cautious
in their rental expectations. In Q1 2017, MG Road
witnessed a decline of 4% in average rental values. Golf
Course Road has also seen a decrease of 2% as
property owners remained flexible in negotiation.
We expect rents to remain stable in most of the
micromarkets. However, Golf Course Extension Road
may see a correction in the range of 2% to 5% since
given significant new supply property owners may
remain soft on lease negotiations in order to kick-start
leasing in new buildings.
Rental and Capital Value Trend (INR)
Source: Colliers International India Research
Note. The above graph represents average Grade A rents per sq ft per
month and average capital values on a per sq ft basis
In a boost to infrastructure, the Rapid Metro line and two
underpasses became operational on Golf Course Road
in Q1 2017. The Rapid Metro connects Delhi and Noida
through an interchange station at Sikandarpur,
(Gurugram). Moreover, the travel time from the airport
and other parts of the cities on this road has improved
significantly due to the start of two underpasses. In our
opinion, the infrastructure improvement on Golf Course
Road will positively affect the Golf Course Extension
Road as well, and will draw occupiers' attention to this
emerging micromarket.
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Rental Values Capital Values

3. 3 Colliers Quarterly | 13 April 2017 | GURUGRAM (GURGAON) | OFFICE | Colliers International
Colliers View
We expect demand to remain strong in the coming
quarters backed by Technology and BFSI firms. We
expect vacancy to inch upwards considering that
significant supply is scheduled for completion in the next
three quarters. Overall rents are likely to remain stable
while high-vacancy micro markets such as Golf Course
Extension road may see a decline in the range of 2% to
5% as property owners are likely to remain flexible in
negotiations in order to kick-start leasing in newly
completed buildings.
Tenants looking for large floorplates in affordable rents
are likely to evaluate options in second-generation
buildings in the Udyog Vihar and Institutional sectors due
to high rents in preferred micromarkets such as
Cybercity and Golf Course Road. In our opinion,
occupiers may also look to Golf Course Extension Road
for their future expansion requirement as the recent
completion of rapid metro corridor has improved the
connectivity of this location significantly.
MAJOR TRANSACTIONS IN Q1 2017
CLIENT BUILDING NAME AREA (SQ FT) LOCATION LEASE/SALE
Pay U Bestech Business Tower 60,000 Sohna Road Lease
EXL DLF Building No. 14 40,000 Cyber City Lease
Regus Spaces DLF Building No. 9A 26,000 Cyber City Lease
Japan International
Corporation for
Transportation
AIPL Masterpiece 25,000 Golf Course Road Lease
Facebook Horizon Centre 20,000 Golf Course Road Lease
Source: Colliers International India Research
KEY UNDER CONSTRUCTION PROJECTS
BUILDING NAME DEVELOPER AREA (SQ FT) LOCATION POSSESSION
IREO City Phase 1 IREO 750,000 Golf Course Extension 2017
GYS Vision Tower B&C GYS 800,000 Golf Course Extension` 2017
Source: Colliers International India Research
Copyright © 2017 Colliers International.
The information contained herein has been obtained from
sources deemed reliable. While every reasonable effort has
been made to ensure its accuracy, we cannot guarantee it. No
responsibility is assumed for any inaccuracies. Readers are
encouraged to consult their professional advisors prior to
acting on any of the material contained in this report.
For more information:
Surabhi Arora
Senior Associate Director |
Research
Tel: +91 124 456 7500
Surabhi.arora@colliers.com
Swapan Dutta
Senior Associate Director |
Office Services
Swapan.dutta@colliers.com
PS Srijan Corporate Park,
14th Floor, GP-2, Block EP
& GP, Salt Lake Sector V,
Kolkata 700091 | India
Notes:
1. Office Market: The prime business locations in Gurgaon are MG Road, Golf Course Road, Cyber City and Udyog Vihar. Manesar on the outskirts of
Gurgaon is also emerging as the city's new office destination.
2. Rents/Capital Value: Market average of indicative asking price for Grade A office space.
3. Available Supply: Total Grade A office space being marketed for sale or lease in surveyed quarter.
4. All figures in the report are based on market information as on 25th March 2017.
For more information:
Surabhi Arora
Senior Associate Director |
Research
Tel: +91 124 456 7500
Surabhi.arora@colliers.com
Vaibhav Mahurkar
Director | Office Services
vaibhav.mahurkar@colliers.com
Prashant Garg
Senior Associate Director | Office
Services
prashant.garg@colliers.com
1st Floor, Technopolis
Building, Golf Course Road,
Sector 54
Gurgaon 122 002
India