NEW DELHI: Office space absorption across Indian cities fell
by five per cent, while supply declined by 34 per cent during January- March
quarter as companies continue to remain cautious about their expansion plans,
according to global property consultant CBRE.
"Office space demand slowed down in the first quarter
of 2014, with around 6.3 million sq ft of office space getting absorbed across
the leading cities as against 6.6 million sq ft in Q1 2013 -- a drop of about five
per cent," CBRE said in its recent report.
An overall 6.6 million sq ft of office space was completed
in the first quarter of 2014 compared to about 10 million sq ft in the
corresponding period of 2013.
"Overall, the commercial real estate market in India
saw sluggish transaction activity and a low level of new completions during Q1
2014. Leading cities continued to see heightened caution from corporate
occupiers, resulting in subdued leasing activity during the first three months
of the year. The majority of these deal closures took place for small to
medium-sized office spaces," the report noted.
IT/ITeS, financial and services
segments continued to drive demand for office space, the report titled India
Office Market View Q1 2014, said.
As for as cities are concerned, the transaction activity was dominated by the NCR, Bangalore and Chennai -- representing about 70 per cent of the total space transacted during the quarter.
"New office space supply in the leading cities was also affected due to existing vacancy levels and lower demand," CBRE noted.
A media report quoting CBRE South Asia Chairman and Managing Director Anshuman Magazine having said: "Occupiers continue to remain focused on optimal space utilization and cost saving strategies."
Going forward, he said, the demand is likely to be concentrated mostly in the peripheral micro-markets of leading cities, owing to abundant availability of cost effective quality space options.
"The ensuing general elections and the formation of a new government are expected to affect the corporate market as well. In the short to medium term, we can expect firms in the IT/ITeS, banking/financial services and pharmaceuticals to remain key contributors to overall office space absorption across major cities," Magazine said.
As for as cities are concerned, the transaction activity was dominated by the NCR, Bangalore and Chennai -- representing about 70 per cent of the total space transacted during the quarter.
"New office space supply in the leading cities was also affected due to existing vacancy levels and lower demand," CBRE noted.
A media report quoting CBRE South Asia Chairman and Managing Director Anshuman Magazine having said: "Occupiers continue to remain focused on optimal space utilization and cost saving strategies."
Going forward, he said, the demand is likely to be concentrated mostly in the peripheral micro-markets of leading cities, owing to abundant availability of cost effective quality space options.
"The ensuing general elections and the formation of a new government are expected to affect the corporate market as well. In the short to medium term, we can expect firms in the IT/ITeS, banking/financial services and pharmaceuticals to remain key contributors to overall office space absorption across major cities," Magazine said.
"Rental values in the Central Business Districts of
Bangalore, Delhi, Pune and Chennai appreciated in the range of 2-5 per cent
quarter-on-quarter (q-o-q) due to increasing occupier interest in leading Grade
A properties," CBRE said.
In Mumbai, feeble demand levels continued to have a
negative impact on rentals across markets, with values dipping by 2-5 per cent
q-o-q in Bandra-Kundra Complex, Prabhadevi, Worli and Nariman Point mainly due
to existing vacancy pressures and weak occupier demand. 
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