BackOffice absorption space falls 37%: report
Net absorption across top eight cities was 3.6 million square feet in the first quarter of 2013
Premium(Mint )
Mumbai: Absorption of office space declined by more than one-third in the quarter ended March, according to a report by property consultant Cushman & Wakefield, as companies try to cut real estate costs in the face of sluggish economic growth.
Net absorption across top eight cities was 3.6 million sq. ft (msf) in the first quarter of 2013 -- a decline of 37% compared with the same period last year, said the report. Fresh supply of office space rose 18% in the three months to 7.9 million sq. ft. The vacancy rate was 19.6%, representing a rise of 3% from a year ago.
“Given the current subdued economic conditions, most occupiers are cautious and have been concentrating on how to leverage current office supply to their advantage and reduce real estate cost from medium to long-term perspective," said Sanjay Dutt, executive managing director (South Asia) at Cushman & Wakefield.
At the same time, corporate entities are “focusing on increasing the efficiency of their existing office spaces, alternate workplace strategy with remote or flexible work stations or hours," Dutt said.
Slowing economic growth, which is estimated to have dropped to a decade’s low of 5% in the year ended 31 March, and high borrowing costs have caused potential real estate buyers to postpone purchase decisions. Corporate entities are seeking to cut costs in the face of the downturn.
Pune recorded the highest net absorption of office space, with an exceptional increase of 30% from a year ago to 842,000 sq. ft. Bangalore and Chennai saw a significant decline of over 80% in net absorption levels followed by Mumbai (minus 38%) and Hyderabad (minus 29%), according to the Cushman & Wakefield report.
According to a survey released by real estate consultant DTZ India on 22 March, close to two-thirds of office occupiers surveyed indicated that they were not looking for new office space..
Economic uncertainty continues to shape occupier decision-making. Some 27% of occupiers signaled they would move to secondary cities in 2013, compared with 35% the previous year. Most occupiers cited efficiency as the top attribute they look for in an office building -- a signal of the mounting financial pressure that’s prompting them to save on costs.
There was a silver lining to the report’s findings. As opposed to last year, when half of the occupiers surveyed indicated that they did not expect to lease new space for at least 12 months, this year a majority of the respondents seeking new office space indicated they are likely to take up new space within the year, DTZ found.
“Part of the driver for this is that occupiers expect rents to remain stable in the short term before returning to growth in 2014," said Anshul Jain, chief executive at DTZ India.
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!
