The leasing of office spaces fell 38 per cent in July-September at over 5 million sq ft in seven major Indian cities over the previous quarter due to the uncertain global economic environment, according to property consultant CB Richard Ellis (CBRE).
“Over 5 million sq.ft. of office space has been absorbed between July and September 2011 compared to 8 million sq ft in Q2, 2011,” CBRE said in a statement.
According to CBRE’s latest report—India Office Market View Q3, 2011, the national capital region (NCR), Mumbai and Bangalore accounted for almost 80 per cent of space absorbed.
“The slowdown in office space take up is indicative of the global corporate sector sentiment affecting the Indian office property market. It is also indicative of the continuing volatility in the financial markets within India,” the CBRE South Asia Chairman and Managing Director, Mr Anshuman Magazine, said.
Several European nations, including Greece, Portugal and Spain, are currently facing financial troubles on account of mounting debt.
The report reviews demand-supply and rentals for Grade A office space in seven major cities — Delhi NCR, Mumbai, Bangalore, Chennai, Hyderabad, Pune and Kolkata.
“This decline in absorption levels is further reflected in the slowdown in rental growth across key micro markets in the country. Over the next few months, I expect supply dynamics will dictate the rental movement especially in the CBD (central business district), he said.
CBRE, however, noted that absorption of office spaces during January-September 2011 was higher at 19 million sq ft against 15 million sq ft in the corresponding period of 2010.
The report also revealed that over 5 million sq ft of new office supply entered the market during this time.
“This (new supply) is almost 50 per cent lower than the supply that came in the last quarter and can be largely attributed to the increase in the cost and reduction in availability of debt besides sluggish offtake of existing stock,” CBRE said.
The new supply was largely concentrated in NCR, Bangalore, Pune and Hyderabad.
The consultant said the supply pressure would continue across most of the key IT/ITeS markets across India, thereby leading to stagnancy in rental values.