Return of the office market
The Hindu Business Line, December 27, 2009, Page 13
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Real estate consultants predict that demand revival will happen in 2010.
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Filling up: Demand for office space is on the rise.
Moumita Bakshi Chatterjee
After the global economic turmoil and conservative expansion by technology and BPO companies dented demand for commercial office space for most of 2009, the market seems to be finally veering towards a turnaround.
Real estate players and analysts are hopeful that the Indian office market – which saw absorption and supply levels slump in 2009 – will stage a recovery in 2010.
Real estate consultants DTZ Research and Cushman and Wakefield have in their respective reports predicted that demand revival will occur in 2010.
Cushman and Wakefield has, however, cautioned that despite demand recovery, delivery may continue to lag supply projections.
“IT and BPO companies account for a big chunk of office space demand. When slowdown struck, these companies stopped asking for space from developers as they did not have visibility on their own requirements. Now that things are improving, they are coming back to the market,” said a senior official in Unitech, which has six IT projects in its portfolio across Delhi NCR and Kolkata.
Market observers claimed that the enquiry level and leasing activity have started picking up after September.
Speaking to Business Line earlier this month, Mr Pranav Ansal, Vice-Chairman and Managing Director of Ansal Properties and Infrastructure Ltd, said though retail and office spaces were under pressure this year, stability could kick in over six months or so.
Growth in sight
“In my view, given another three to four months companies will start looking at growth. That is when they will also look for office and commercial spaces. Also, remember that over the last 12-18 months new development on the commercial side has been limited, so there will be a demand spillover effect,” the Managing Director said.
According to DTZ, the pace and scale of the anticipated recovery will be led by tier-I cities such as Delhi NCR, Mumbai and Bangalore, even as tier-II cities (including Kolkata and Chennai) will see a gradual recovery in the later part of 2010.
While IT-enabled services will continue to drive the absorption volumes, DTZ said, telecom, banking financial services and insurance, and manufacturing will aid office space demand. On the flip side, DTZ has cautioned that close to 18 million sq.ft of oversupply could hit the market in 2010.
Looking back, 2009 logged commercial space absorption of 26.3 million sq.ft in major cities, almost 29 per cent lower than last year (37 million sq.ft), according to Cushman and Wakefield.
Bangalore witnessed the highest space being take up (5.7 million sq.ft). Hyderabad and Kolkata each saw high growth in absorption (105 per cent over last year).
With the office market struck by slowdown pangs in 2009, the average vacancy level spiked. “The overall vacancy level for eight major cities in India (including Delhi NCR, Mumbai, Kolkata, Hyderabad, Chennai and Bangalore) was recorded at 19 per cent with Hyderabad seeing the highest individual city vacancy of 28 per cent at the end of 2009, and Ahmedabad recording the lowest vacancy (10 per cent).
Vacancy in cities like Chennai (24 per cent), Hyderabad (28 per cent), Pune (26 per cent) and Kolkata (23 per cent) was largely concentrated towards IT/ITeS office space,” said Cushman and Wakefield.
Moreover, most micromarkets witnessed 15-25 per cent rental decline over the last year. But the last quarter of 2009 has seen rentals stabilise across locations with only a few micromarkets recording a marginal drop of 1-2 per cent. “Mumbai's Lower Parel witnessed the highest fall in rentals by 40 per cent in the past year,” it added.
The Hindu Business Line, December 27, 2009, Page 13
--------------------------------------------------------------------------------
Real estate consultants predict that demand revival will happen in 2010.
--------------------------------------------------------------------------------
Filling up: Demand for office space is on the rise.
Moumita Bakshi Chatterjee
After the global economic turmoil and conservative expansion by technology and BPO companies dented demand for commercial office space for most of 2009, the market seems to be finally veering towards a turnaround.
Real estate players and analysts are hopeful that the Indian office market – which saw absorption and supply levels slump in 2009 – will stage a recovery in 2010.
Real estate consultants DTZ Research and Cushman and Wakefield have in their respective reports predicted that demand revival will occur in 2010.
Cushman and Wakefield has, however, cautioned that despite demand recovery, delivery may continue to lag supply projections.
“IT and BPO companies account for a big chunk of office space demand. When slowdown struck, these companies stopped asking for space from developers as they did not have visibility on their own requirements. Now that things are improving, they are coming back to the market,” said a senior official in Unitech, which has six IT projects in its portfolio across Delhi NCR and Kolkata.
Market observers claimed that the enquiry level and leasing activity have started picking up after September.
Speaking to Business Line earlier this month, Mr Pranav Ansal, Vice-Chairman and Managing Director of Ansal Properties and Infrastructure Ltd, said though retail and office spaces were under pressure this year, stability could kick in over six months or so.
Growth in sight
“In my view, given another three to four months companies will start looking at growth. That is when they will also look for office and commercial spaces. Also, remember that over the last 12-18 months new development on the commercial side has been limited, so there will be a demand spillover effect,” the Managing Director said.
According to DTZ, the pace and scale of the anticipated recovery will be led by tier-I cities such as Delhi NCR, Mumbai and Bangalore, even as tier-II cities (including Kolkata and Chennai) will see a gradual recovery in the later part of 2010.
While IT-enabled services will continue to drive the absorption volumes, DTZ said, telecom, banking financial services and insurance, and manufacturing will aid office space demand. On the flip side, DTZ has cautioned that close to 18 million sq.ft of oversupply could hit the market in 2010.
Looking back, 2009 logged commercial space absorption of 26.3 million sq.ft in major cities, almost 29 per cent lower than last year (37 million sq.ft), according to Cushman and Wakefield.
Bangalore witnessed the highest space being take up (5.7 million sq.ft). Hyderabad and Kolkata each saw high growth in absorption (105 per cent over last year).
With the office market struck by slowdown pangs in 2009, the average vacancy level spiked. “The overall vacancy level for eight major cities in India (including Delhi NCR, Mumbai, Kolkata, Hyderabad, Chennai and Bangalore) was recorded at 19 per cent with Hyderabad seeing the highest individual city vacancy of 28 per cent at the end of 2009, and Ahmedabad recording the lowest vacancy (10 per cent).
Vacancy in cities like Chennai (24 per cent), Hyderabad (28 per cent), Pune (26 per cent) and Kolkata (23 per cent) was largely concentrated towards IT/ITeS office space,” said Cushman and Wakefield.
Moreover, most micromarkets witnessed 15-25 per cent rental decline over the last year. But the last quarter of 2009 has seen rentals stabilise across locations with only a few micromarkets recording a marginal drop of 1-2 per cent. “Mumbai's Lower Parel witnessed the highest fall in rentals by 40 per cent in the past year,” it added.
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