Bangalore: Office rentals continued to be depressed in key markets such as Mumbai, Pune and Chennai as supply outpaced demand in the three months ended December, realty consultants said.
Although occupancy levels in commercial office space improved marginally, there is increased demand only for high-end projects, said a report by property consultancy CB Richard Ellis. The firm based its report on data collected from seven cities—Delhi, Mumbai, Bangalore, Hyderabad, Pune, Chennai and Kolkata.
“The downward pressure on rentals in Chennai and Pune are primarily due to oversupply,” said Kaustuv Roy, executive director, Cushman and Wakefield Inc., a property advisory. “But hopefully in the next six months, we will see an upward movement in rentals in larger markets like Mumbai and Delhi-NCR (national capital region).”
Of the 84 million sq. ft of space scheduled for completion in six key Indian cities, only 66 million sq. ft is likely to come up in the next five quarters, DTZ Research said in a December report.
After rentals fell between 25% and 40% in almost all markets last year, vacancy levels, despite healthy absorption, will increase in the first half of 2010 and then stabilise or fall in the latter part of the year, the report predicted. Vacancy rates in secondary business districts, such as Nehru Place in New Delhi, increased from 12% in the third quarter in 2009 to 21% in the fourth quarter due to poor leasing acitivity.
All three consultancies said telecom and consumer goods firms would drive demand in the near term, as rentals from technology companies would be slower to recover. Roy believes that even in the case of the many upcoming special economic zones focussed on information technology, only those tax-free enclaves that are nearing completion would see better occupancy levels.