The office market in India may finally see some uptick towards the end of this year, said report. By the end of the year office space absorption is expected to be at approximately 30 million square feet with markets like Bangalore, Pune and Mumbai leading it, said a report by Cushman & Wakefield. For 2012 the total absorption rate was around 27-28 million square feet.
The initial sign of the pick up is evident in the total absorption registered in the second quarter of calender year 2013, said the report. The period April - June 2013 recorded a total absorption of approximately 7.2 million square feet (msf) which was marginally higher than the same period last year, but better than 3.6msf reported in the first quarter of 2013.
"I think from hereon we will see a positive uptick in the commercial/office space segment. Over the last year or two we have seen trend such as over supply and overall economic environment that resulted in cautious outlook. The current uptick is due to the pent-up demand among corporates who preferred to have a cautious outlook," said Ravi Ahuja, executive director, Cushman & Wakefield.
For the first half of 2013, though the office market in India registered a downtrend in absorption. The total net absorption across eight cities--Ahmedabad, Bengaluru, Chennai, Hyderabad, Kolkatta, NCR, Mumbai and Pune-- denoted a decline of 15 % at 10.9 million square feet compared to the same period last year. This was primarily due to the dismal performance in the first quarter of the year.
Net absorption refers to the new leasing activity within the city and includes only the incremental new space take-up in instances of relocations and expansion from within the city. It does not include lease renewals and relocations to office spaces that have the same areas.
Beating the national trend, Pune recorded an increase of 37 % in absorption of office space in H1 2013 over H1 2012, with consistent levels of absorption being achieved in both quarters of the first year in 2013. In the second quarter of 2013, Pune witnessed a total supply of approximately 364,000 square feet (sf).
Following Pune, Chennai was the only other region that saw a positive trend in absorption rates. Half yearly net absorption figures for 2013 registered a rise of nearly 6 % versus H1 2012. Q2 2013 on the other hand saw absorption of 1.4 msf, a huge increase over Q1 2013, with most of the leasing transactions in the Grade A commercial office spaces with the IT sector continuing to be the major demand driver followed by the BFSI sector.
"The office real estate market has been able to keep afloat in the midst of the negative market sentiments, which include poor GDP growth projections, depreciating value of Rupee against dollar, political volatility and continued unrest in the global economic conditions. Even while absorption registered de-growth of 15 % year-on-year, the second quarter of 2013 has outperformed on both accounts of year-on–year as well as quarter-on–quarter, indicating an existing strain of growth that is still visible amongst the corporate world. Even though corporate have been cautious in their expansion, the trend has been positive, albeit slow. By the end of the year office space absorption is expected to be at approximately 30 msf with markets such as Bangalore Pune and Mumbai leading the trend," said Sanjay Dutt, Executive Managing Director, South Asia, Cushman & Wakefield.
Similarly, fresh supply during H1 2013 also declined by 3 % and was recorded at 17.6 msf. Vacancy rates at the end of Q2 2013 were noted at 19.6 %, an increase of 1.7 percentage points over the same period last year.
Also, there was increase in pre-commitments in the second quarter of 2013 which was registered at approximately 2.65 msf in Bengaluru, Hyderabad, Mumbai and Pune.
Ahuja also stated that rentals in certain regions have also started to see an uptick. He also stated that other than the IT sector, the growth for commercial space will be driven by industries like Pharma and banking and finance. "The Pharma sector is going very active. We have met around three to four large players who are looking at consolidating their operations," added Ahuja.
The initial sign of the pick up is evident in the total absorption registered in the second quarter of calender year 2013, said the report. The period April - June 2013 recorded a total absorption of approximately 7.2 million square feet (msf) which was marginally higher than the same period last year, but better than 3.6msf reported in the first quarter of 2013.
"I think from hereon we will see a positive uptick in the commercial/office space segment. Over the last year or two we have seen trend such as over supply and overall economic environment that resulted in cautious outlook. The current uptick is due to the pent-up demand among corporates who preferred to have a cautious outlook," said Ravi Ahuja, executive director, Cushman & Wakefield.
For the first half of 2013, though the office market in India registered a downtrend in absorption. The total net absorption across eight cities--Ahmedabad, Bengaluru, Chennai, Hyderabad, Kolkatta, NCR, Mumbai and Pune-- denoted a decline of 15 % at 10.9 million square feet compared to the same period last year. This was primarily due to the dismal performance in the first quarter of the year.
Net absorption refers to the new leasing activity within the city and includes only the incremental new space take-up in instances of relocations and expansion from within the city. It does not include lease renewals and relocations to office spaces that have the same areas.
Beating the national trend, Pune recorded an increase of 37 % in absorption of office space in H1 2013 over H1 2012, with consistent levels of absorption being achieved in both quarters of the first year in 2013. In the second quarter of 2013, Pune witnessed a total supply of approximately 364,000 square feet (sf).
Following Pune, Chennai was the only other region that saw a positive trend in absorption rates. Half yearly net absorption figures for 2013 registered a rise of nearly 6 % versus H1 2012. Q2 2013 on the other hand saw absorption of 1.4 msf, a huge increase over Q1 2013, with most of the leasing transactions in the Grade A commercial office spaces with the IT sector continuing to be the major demand driver followed by the BFSI sector.
"The office real estate market has been able to keep afloat in the midst of the negative market sentiments, which include poor GDP growth projections, depreciating value of Rupee against dollar, political volatility and continued unrest in the global economic conditions. Even while absorption registered de-growth of 15 % year-on-year, the second quarter of 2013 has outperformed on both accounts of year-on–year as well as quarter-on–quarter, indicating an existing strain of growth that is still visible amongst the corporate world. Even though corporate have been cautious in their expansion, the trend has been positive, albeit slow. By the end of the year office space absorption is expected to be at approximately 30 msf with markets such as Bangalore Pune and Mumbai leading the trend," said Sanjay Dutt, Executive Managing Director, South Asia, Cushman & Wakefield.
Similarly, fresh supply during H1 2013 also declined by 3 % and was recorded at 17.6 msf. Vacancy rates at the end of Q2 2013 were noted at 19.6 %, an increase of 1.7 percentage points over the same period last year.
Also, there was increase in pre-commitments in the second quarter of 2013 which was registered at approximately 2.65 msf in Bengaluru, Hyderabad, Mumbai and Pune.
Ahuja also stated that rentals in certain regions have also started to see an uptick. He also stated that other than the IT sector, the growth for commercial space will be driven by industries like Pharma and banking and finance. "The Pharma sector is going very active. We have met around three to four large players who are looking at consolidating their operations," added Ahuja.
http://www.business-standard.com/article/companies/office-real-estate-market-may-see-uptick-113071100749_1.html
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