Office absorption dropped 25% in 2013: report
Companies are focusing on relocation, expansion and consolidation in order to rationalize costs and create greater value for their operations within India
Mumbai: Prospective tenants continue to stay away from the office market in 2013 even as investors remain optimistic about potential of Indian commercial real estate.
Net office absorption declined 25% across the top eight markets—Mumbai, Bangalore, Chennai, Hyderabad, Kolkata, Ahmedabad, the National Capital Region centred on Delhi, and Pune—in 2013 compared to 2012, according to a report released by real estate consultant Cushman & Wakefield on Thursday.
The total net absorption for 2013 was recorded at 23 million square feet (msf). Most cities witnessed a decline in net absorption of 20-40% during the year, except Pune, where incremental new space take-up increased by 15%, the report said. Mumbai registered the highest net office space absorption at 4.7 msf, followed by Bangalore with office space absorption of around 4.6 msf in 2013.
Net absorption declined mostly on account of companies focusing on relocation, expansion and consolidation in order to rationalize costs and create greater value for their operations within the country, the report states.
“Caution prevailed across corporations due to the slower growth of the Indian economy. Also at the political arena, this has been a year of realignments and retrospect," said Sanjay Dutt, executive managing director, South Asia, Cushman & Wakefield.
Total supply during the same period declined by 14% over last year to 34 msf. Vacancies across the office market increased by 0.9 percentage point from 2012 to 19.4%, the report said.
Private equity investments in real-estate were healthy in 2013 with large contributions from investments in pre-leased office assets, the report said.
Investments in office assets were concentrated in Bangalore and Pune. “Investors have taken a keen interest in office spaces, especially in future high growth locations," Dutt said.
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