Bangalore October 31, 2013 : International property consultancy Colliers International, has released its latest India Office Property Market Overview report for Quarter 3. The report analyses real estate development in Office Property across 6 major cities in India.
Highlights of the report:
- Businesses adopt a conservative approach resulting in softening of overall demand for commercial real estate.
- In 3Q 2013, the six major cities – Mumbai, NCR, Bengaluru, Chennai, Kolkata and Pune recorded a 20% reduction in lease of commercial space compared to the last quarter.
- A large percentage of the demand for office space was generated due to companies relocating or consolidating their operations to a single cheaper location.
- Developers now prefer to develop residential rather than office projects
- More than 60% of the new supply added this quarter was concentrated in Bangalore, Delhi and NOIDA.
- Corporate demand will continue to be slow at least until the national elections due early next year.
Amit Oberoi, Head of Research – Colliers International, says “In 3Q 2013, the six major cities – Mumbai, NCR, Bengaluru, Chennai, Kolkata and Pune recorded a cumulative rental space absorption of 6.2 million sq. ft. in commercial Grade ‘A’ office space. This is 20% less than last quarter’s absorption of 8 million sq. ft. The decreasing demand is a reflection of the prevailing low business and investor confidence. Due to the slowdown in the economy and the political uncertainty in the country, companies are deferring their decision to take up real estate. Also a significantly large percentage of the uptake for office space is being generated due to companies relocating or consolidating their operations to a single larger but cheaper location.
Developers are refraining from building office buildings for the speculative demand. A number of developers now prefer to develop residential rather than office projects. In the 3rd quarter (July to September) of 2013, construction of 3.1 million sq.ft. of new office space was completed as compared to 5.8 million sq. ft. in first quarter and 4 million sq. ft. in second quarter. More than 60% of this new supply was added in Bangalore and NOIDA. New project launches in this quarter totalled nearly 5 million sq.ft. and these were mainly in Bangalore, Delhi and NOIDA.
Overall commercial lease rental values were stable, except in a few micro-markets of Kolkata and Gurgaon, wherein rentals declined by 1 to 7%. Rental values across most micro-markets in these 6 cities will remain stable, even though demand for new office space has declined. This is because there is limited new supply that is being added to the office inventory in these cities. Corporate demand will continue to be slow at least until the national elections due early next year. CCI Newswire