With rentals at an affordable level and the general perception being that the recession is bottoming out, a number of companies that had deferred space take-up plans are now amenable to real estate acquisitions. However, no big jumps can be expected soon. According to ‘The India Office Market View – Q3, 2009’, a quarterly report by CB Richard Ellis on Grade A office space across key cities in India, while most of the micro markets in Mumbai, Bangalore, Hyderabad and Kolkata saw little or no rise in rents, the rentals in Delhi CBD and Gurgaon went up.
“The increase in demand is largely due to improving economic conditions, positive market sentiments and growing corporate confidence,” says Anshuman Magazine, chairman and MD, CB Richard Ellis, South Asia. “However, it would take some time for the supply-demand gap to be bridged. Both rental and capital values are expected to remain stagnant or under downward pressure in the medium term.”
Delhi NCR : The Central Business District (CBD) witnessed a revival of interest of sorts. Grade A developments accounted for almost 96 per cent of the total take-up of about 36,000 sq. ft in the third quarter.
No major transactions were concluded in the Secondary Business District (SBD) of Nehru Place, leaving most of the supply released in the preceding quarter unoccupied. The reasons could be increased congestion due to the Metro construction, relatively high rentals and availability of better options in other commercial areas in New Delhi.
In the Saket District Centre, approximately 25-27 per cent of available office space is still vacant due to low infrastructure development.
Jasola has emerged as an attractive option for occupants from the industrial areas of Mohan Cooperative and Faridabad.
Approximately 32,000 sq. ft was leased out here in the third quarter. However, due to the very high level of vacancy at around 50 per cent, rental values declined by around 4 per cent.
In Gurgaon, rentals for Grade A office space increased by 8 per cent, one of the very few micro markets across the country to show such enhancement. Noida witnessed only around 0.15 million sq. ft of take-up.
Mumbai : In line with the last quarter, an increasing number of organisations in the Central Business District (CBD) of Nariman Point showed an interest in cheaper locations in the Extended and Alternate Business Districts.
Continued construction would add over 3.5 million sq.
ft of new supply to the Extended Business District (EBD) by 2010. Rentals are expected to remain under pressure and vacancy levels should rise as the new supply hits the market.
The Alternate Business District (ABD) of BandraKurla Complex and Kalina continued to witness better absorption than other business districts. However, here, too, vacancy was high at around 25 per cent and prevented any appreciation in values.
The Peripheral Business District (PBD) of Powai and Goregaon witnessed large space take-up by a few financial institutions for their knowledge process outsourcing centres. In the backoffice micro markets of Thane and Navi Mumbai, most of the industrial lands are being converted into infotech parks.
Bangalore : The overall sentiment was optimistic, but transaction closure was low.
Rental values continued to remain stagnant. Total available stock in the third quarter was estimated at 2.8 million sq. ft, of which only about 0.56 million sq. ft was absorbed.
Chennai : Enquiry levels rose, but actual transaction was low. Total absorption till date is approximately 1.65 million sq. ft.
Kolkata : Rental values should remain stable across most micro markets, and the vacancy level is expected to gradually reduce as no fresh supply is expected over the next few quarters.