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Business News/ Companies / News/  Net absorption of commercial office space in top eight cities falls 50% in Q3: Cushman & Wakefield
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Net absorption of commercial office space in top eight cities falls 50% in Q3: Cushman & Wakefield

The decline is due to lack of quality ready-to-move in office spaces, says Cushman & Wakefield

Among the major cities, Hyderabad saw the highest activity with about 2.4 million sq. ft absorbed during the third quarter while pre-commitments stood at 385,000 sq. ft. Photo: MintPremium
Among the major cities, Hyderabad saw the highest activity with about 2.4 million sq. ft absorbed during the third quarter while pre-commitments stood at 385,000 sq. ft. Photo: Mint

Mumbai: Total office area leased out in India’s top eight cities fell by half in the September quarter from a year ago, a global property consultant said.

According to a report by Cushman & Wakefield, net absorption in the eight cities including Mumbai, Delhi-National Capital Region (NCR), Kolkata, Bengaluru, Ahmedabad and Hyderabad fell due to lack of quality ready-to-move in office spaces in these markets.

Total absorption or the total area of office spaces leased out by tenants or developers in these cities during the three-month period stood at 5.4 million sq. ft.

“Lack of quality ready space in key micro markets at a desirable price has led to many corporations holding out on their leasing plans, despite the overall sentiments for business remaining positive," the report said.

During the same period, pre-commitments for future supply or pre-leases of office spaces saw a sharp rise of 75% at around 4.7 million sq. ft over the same period last year, with major portion of it coming from Mumbai. The city saw a significant increase in pre-commitments in the third quarter at about 2.9 million sq. ft.

“An increase in pre-commitments can be seen as a sign of changing real estate cycle as far as the office space segment is concerned... As the economy stabilizes and with companies looking at consolidation and expansion especially in the case of Information Technology (IT) or IT-enabled services, quality space is now the key factor governing the supply side dynamics," said Sanjay Dutt, executive managing director, India, Cushman & Wakefield.

He said a strong supply pipeline is expected this year as investors take a keen interest in office assets.

Among the major cities, Hyderabad saw the highest activity with about 2.4 million sq. ft absorbed during the quarter while pre-commitments stood at 385,000 sq. ft.

“Post the demerger (of the state of Andhra Pradesh with statehood granted to Telangana in June 2014) and with the new government coming up with policies for economic growth and stability, the corporate confidence has seen a growth," the report said.

Other cities such as Delhi, Mumbai and Bengaluru saw a sharp decline in net absorption of commercial office space. While Mumbai saw a decline of 124%, Bengaluru and Delhi-NCR witnessed a fall of 84% and 42% respectively.

Dutt said with supply for 2016 expected at as much as 62 million sq. ft, the rise in pre- commitments would be reassuring for developers. “However, a matter of caution in this respect is the sharp decline in net absorption, as this may lead to rise in vacancy in short to medium time owing to continued non-occupancy of stock, even while future supply gets pre-committed," he added.

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Published: 09 Nov 2015, 08:16 PM IST
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