Demand for office space weakened in September quarter: report1 min read . Updated: 08 Oct 2013, 05:37 PM IST
The July-September period witnessed the lowest addition of office space in several quarters, the report states
Mumbai: Demand for commercial office space weakened in most markets in the July-September quarter as absorption declined by 14% at around 6 million sq. ft compared to about 7 million sq. ft in the previous quarter, according to the real estate consultancy CBRE South Asia Pvt. Ltd.
Corporate occupiers continued to optimize their portfolio, downsizing in certain instances, focused on consolidating their real estate footprint and opted for relocating to peripheral business districts, according to the office market report released by CBRE on Tuesday.
“Corporate office occupiers remained cautious amid a subdued economic outlook, a trend which continued to inhibit office leasing activity across the country." said Anshuman Magazine, chairman and managing director of CBRE South Asia.
The July-September period witnessed the lowest addition of office space in several quarters, largely attributable to the prevailing high vacancy pressures in completed projects and poor commitment levels in under-construction properties, the report states. The completed office space dropped 76% to less than 3 million sq. ft compared with around 10 million sq. ft in the preceding quarter.
Gurgaon in the National Capital Region, Lower Parel, Andheri, Goregaon and Navi Mumbai in Mumbai and the Outer Ring Road in Bangalore were the most preferred micro-markets for office space leasing in the second quarter, the report states.
“Owing to slowdown in construction activity, huge pent-up supply is lined up across various micro-markets over the next six to nine months which might result in downward pressure on asset pricing, thereby posing a significant risk to market stability," said Magazine.
Rental values remained largely stable and given the prevailing weak sentiment, occupiers will continue to hold strong leverage in the office leasing market. Owing to large supply addition, rental and capital values are likely to remain under pressure in most of the micro-markets in the short to medium term, the report states.