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The market share of the total office space transacted in the country by the three leading hubs of National Capital Region, Mumbai and Bangalore reduced to about 62 per cent in the third quarter of this year from about 75 per cent in the previous quarter. This was due to these three cities witnessing a decline in transaction activity while other office markets such as Hyderabad and Chennai showed an increase in the same, according to a report by real estate consultancy CBRE.
The report, which covered seven cities comprising NCR, Mumbai, Bangalore, Chennai, Hyderabad, Pune and Kolkata, pointed to the overall office space absorption sliding by 14 per cent quarter-on-quarter during the third quarter of 2012, to about 6 million square feet as compared to over 7 million square feet in the previous quarter.
Existing vacancy levels and lower demand also resulted in a decline of about 47 per cent on a quarter-on-quarter basis in new office space supply across these leading cities, with about 5 million square feet of office space being completed in Q3 against over 9 million square feet in the previous quarter.
Commenting on the findings of the report, Chairman of CBRE, South Asia, Anshuman Magazine said: “While the first half of this year witnessed an increase in office space absorption, the figures from the third quarter confirm the expected decline in demand for office space in the second half. “This decline is mainly due to the sluggishness in the local as well as in the global economy. Corporates are consolidating as well as improving efficiency of their current space. The slowdown in demand is expected to continue in the coming months. This, coupled with an increase in supply, will keep rates under pressure,” he added.
According to the report, rental values remained largely stable across most micromarkets such as Gurgaon, Noida, Outer Ring Road, Whitefield, Hitec City and Gachibowli, as occupier expansions faced cost pressures and consolidation continued as the key theme.
On occupier behaviour, the report said: “The average floor size required by tenants reduced with a large number of small size deals being reported in the market. Tenants continued to opt for more cost effective locations in the suburbs, while leading IT and IT-enabled services occupiers continued to expand. On account of all these factors, key markets such as Mumbai and New Delhi continued to observe transactions for relocation as well as consolidation.”
On the industry outlook the report maintained that concerns over the global economic outlook were expected to continue to weigh on occupier sentiment in the short to medium term, with the overall mood in the leasing market expected to remain cautious.
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