Demand for office space to go up to 30 mn sq ft in 2013: DTZ

Mumbai: The demand for office space is likely to increase to 30.5 million sq ft this year, global real estate adviser DTZ said, though another acclaimed real estate consultant Cushman & Wakefield has painted a grim picture on office space absorption index for the year’s first quarter.

“Fears of downside risks for the global economy have started to fade, which combined with local economic policy amendments including the opening of 51 per cent FDI in multi- brand retail, climb-down of repo rates by the Reserve Bank of India (RBI) and stronger economic outlook, have resulted in improved market sentiment,” DTZ India CEO Anshul Jain said.

 “Consequently, demand for office space is expected to increase and reach to around 30.5 million sq ft this year, representing an increase of nearly 12 per cent year-on-year,” Jain said. 

Cushman & Wakefield in their recent report said that there has been a huge 37 per cent drop in office absorption rate in India in the first quarter of 2013 as compared to the corresponding period last year with Bengaluru and Chennai seeing a significant decline in net absorption levels followed by Mumbai and Hyderabad.

Brushing aside the negative sentiments, Jain said, “Further, companies which had stalled their expansion plans due to poor market sentiment, are expected to recommence the process in the near future as they move out of the ’wait-and-see’ phase observed over the past year,” adding, “Office demand in FY14 is therefore expected to be largely driven by business expansion and we expect to see higher levels of space absorption in 2013 than 2012.”

“Rentals are expected to be stable in the near future. At the same time, it is anticipated that rents will increase over the next 12-24 months. This will drive the leasing decision in the short-term,” he said.

Of the estimated 30.5 million sq ft, the IT sector is estimated to take up around 15 million sq ft of space, compared to only 12 million sq ft in 2012, an increase of 24 per cent year-on-year.

According to DTZ, the demand for office space from the BFSI sector will also rise significantly primarily after the passage of the Banking (Amendment) Bill.

“This bill is aimed at attracting foreign investment and paves way for the RBI to issue new banking licenses to the private sector. This move will further increase demand for commercial office space from the BFSI sector and therefore increase its proportionate share of demand in the coming years,” Jain added.