Mumbai to lead office space take-up

 

 

 

3rd March,2010

Mumbai and Delhi NCR are expected to absorb

 about 20-22 per cent of the projected demand for  

office space during 2010-2012, says a report The year 2009

would be marked in Indian real estate as one of the most 

difficult periods for the industry in recent times.

However, despite the turbulence and uncertainty, there are 

momentous opportunities to learn through the turn.

 

With signs in the global economy that the worst may be

behind us, commercial office space in India has begun to 

consolidate, focusing on affordability, diversification and delivery, 

says a report by realty consultant Jones Lang LaSalle Meghraj.

The year witnessed a considerably lower net absorption of 19.6 million sq ft 

against a robust net absorption of 33.1 million sq ft in 2008.

Quarterly absorption rate was recorded at 17 per cent

in the fourth quarter of 2009, which has been increasing 

steadily after hitting bottom in the first quarter of 2009.

Indian real estate witnessed net absorption of 8 million sq ft 

in quarter 4, 2009, nearly four times the lowest witnessed in quarter 1, 2009.

With lower rents in IT as well as non-IT spaces,

the opportunistic demand is led by domestic occupiers, 

who have expanded their real estate portfolios in various 

Indian cities. The sunshine sectors ­ telecom, pharmaceuticals,

healthcare and manufacturing leased large spaces in various cities. 

A larger share of transactions happened in operational vacant

stock rather than under-construction projects in 2009, contrary

to the trend observed during 2007 and 2008, when options in 

operational office space weren't available to the tenants in

the same measure.

Projected supply and demand of office space Office 

space amounting to 162.6 million sq ft is expected to

become operational in the next three years, which would

increase the pan-India grade-A office stock to 387.4 million sq ft.

By end-2010, Mumbai is expected to lead in terms of

operational office stock in the country, pushing the leader,

Bangalore, to second position.

About 85-90 per cent of the near term supply of 68.3 million sq ft,

which is expected to become operational in 2010, is

in advanced stages of construction with more than 50 per cent

of the structure completed at end-2009.

The pace of supply infusion is expected to outgrow the 

demand in the medium, term thus creating a condition of 

oversupply across the secondary and suburban micro markets.

Net absorption of office space is projected to grow at a compound 

annual growth rate (CAGR) of 29 per cent during 2009-2012,

increasing from 19.6 million sq ft registered in 2009 to 42.2 million sq ft in 2012.

While Mumbai and NCR Delhi are expected to absorb

about 20-22 per cent of the projected demand during 

2010-2012, Bangalore and Chennai are expected to 

absorb about 14-15 per cent of the projected demand

during the same period.

Despite a projected growth of 10 per cent for IT/ITES 

and the BPO sector in India during 2010, demand for

real estate space is only expected by end of 2010.
During 2011-2012, with better growth projections 

of IT/ITES sector, demand for office space in these 

micro markets is likely to increase.