Prime office space segment grows 16% in first half of 2013

Supplies mostly came from large commercial and special economic zone developments in major citiesM
Mumbai: The prime office space segment across key cities — Mumbai, the National Capital Region (NCR), Pune and Bangalore — saw a fresh supply of 20 million sq ft in the first half of this year, growth of 16 per cent as compared to the last year.

An estimated 10.8 million sq ft of new supply was added in the second quarter, while 9.9 million sq ft was added in the first quarter of this year, according to the India Office Market View Q2 2013 by CBRE.

The supply primarily came from large commercial and special economic zone developments in major cities.

Seven million sq ft was absorbed in the second quarter against 6.6 million sq ft in the previous quarter. Downward pressure, however, continued to persist, as absorption was down six per cent when compared to the same period last year.

Anshuman Magazine, chairman and managing director of CBRE, South Asia, said, “Despite a large supply infusion into the market, the prevailing global economic outlook continues to play a big part in expansion plans for corporates across the board. Cost reduction continues to be a primary concern and the overall mood in the leasing market remains cautious. This sentiment would continue till the global as well as Indian economic situation improves.”

The first half of 2013 saw 14 million sq ft getting absorbed across major cities. The transaction activity in second quarter of 2013 was dominated by NCR, Mumbai, Bangalore and Pune, which represented 88 per cent of the total transacted space during the quarter, the report added. The report, however, presents a bleak picture for the future.

“The prospects for the economy do not appear very bright in the coming couple of quarters and rising fiscal deficit and currency devaluation are expected to dampen the overall investment sentiment,” it said.

The overall mood in the leasing market is expected to remain cautious. While few large scale transactions for consolidation or relocation of offices might be reported, majority of the demand is expected to be for small and medium-sized office space only. And supply levels would continue to exert pressure on rental movement and market recovery in most micro-markets.