The Hindu Business Line : Commercial space cheaper, yet few takers

Investment World - Real Estate & Construction
Industry & Economy - Real Estate & Construction
States - Andhra Pradesh
Commercial space cheaper, yet few takers

In Vizag, the slowdown in the retail and IT sectors has seen a perceptible decline in the demand for commercial property.

— C.V. Subrahmanyam

Mall owners are finding it difficult to let out shops.

Ch. R. S. Sarma

The economic slowdown has hit the value of commercial space in Visakhapatnam. With several retail chains closing down, commercial space is cheaper by 25-30 per cent . However, even at the reduced rates, there are not many takers and it is becoming increasingly difficult for mall owners to let out shops. “To-let” boards are common sight in commercial complexes at busy junctions.

Subhiksha has closed down and the activity is sluggish even in the case of other retail stores. Thanks to their staying power, the bigger retail chains, such as Reliance and More (Aditya Birla group), seem to be able to withstand the market slump. But they are not looking at expanding their operations.

Land still pricey

“It is economically unviable now to buy land in the city and build a commercial complex, as the land rates have not gone down substantially enough in the city limits, though there has been a marked slump on the outskirts. The rents have been reduced due to the fall in demand, but even then there are no takers,” says Mr Raju, a builder.

As a result, some of the companies prefer to take on rent apartments in residential areas to cut costs. Only garment dealers, retailers, and a few others are still continuing to hire commercial space in the busy areas, as only that makes business sense.

The commercial complex owners are unable to pay back bank loans. This trend has, of course, helped the smaller kirana merchants to an extent, but they too are not immune to the slowdown.

IT sector EFFECT

The IT sector is stagnating in Visakhapatnam. Many of the companies granted sites at Rushikonda have not yet started operations, and even the few which have, are not doing so on any substantial scale. They are adopting a wait-and-watch policy and it is not clear how long it will take for these companies to get going.

Among the bigger companies, Satyam Computer is in a crisis. Wipro has completed the construction of an impressive building at the TB hospital junction in the city, but it is not known when the company will begin operations.

Companies in other sectors too are either resorting to wage-cuts or retrenchment and, therefore, the purchasing power of the people has suffered.

There is no sign of commercial property segment reviving in the near term. Many major housing projects, such as the one proposed by Jurong at Madhurawada, are not making progress and the present trend is likely to continue for some time.