Mumbai : Decline in supply of additional office space is likely to put pressure on rental values in the coming quarters, even as the demand is expected to be moderate, industry experts say.
According to a report, less than 3 million sq ft of office space was added in July-September quarter, which is a decline of nearly 50 per cent compared to the same period in 2012, and 75 per cent compared to April-June quarter of 2013.
“Owing to a slowdown in construction activity, pent up supply has been lined up across various micro-markets for release over the next 6-9 months, which might result in pressures on asset pricing,” CBRE South Asia Chairman and Managing Director Anshuman Magazine said.
The demand for office space is likely to moderate or even be low in certain cities, mainly because corporates are now focusing on consolidation and relocation to quality locations with lower rentals.
In Q3 2013, relocation and consolidation were primary demand generators for commercial office space, global consultancy firm Colliers International said in a report.
During the quarter, six major cities – Mumbai, Delhi NCR, Bengaluru, Chennai, Kolkata and Pune recorded a cumulative rental space absorption of 6.2 million sq ft, which is 20 per cent less than 8 million sq ft year ago.
“The decreasing demand is a reflection of the prevailing low business and investor confidence. Due to the slowdown in the economy and the political uncertainty in the country, companies are deferring their decision to take up real estate,” Colliers’ Head of Research Amit Oberoi said.
“Also a significantly large percentage of the uptake for office space is being generated due to companies relocating or consolidating their operations to a single larger but cheaper location,” he said.
According to Colliers, while Mumbai commercial market recorded absorption of around 6.5 lakh sq ft of Grade A office space, only a few mid-sized deals were concluded in Delhi resulting in 1.5 lakh sq ft of Grade A office space absorption during the quarter.