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  • Office space absorption in Q1 2014 drops by nearly 5% over Q1 2013 due to subdued demand for office space in leading cities

Office space absorption in Q1 2014 drops by nearly 5% over Q1 2013 due to subdued demand for office space in leading cities

April 8, 2014
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New office space supply also witnesses a drop of 34% over the same period in 2013

New Delhi, April 7, 2014: 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 of the country as against 6.6 million sq. ft. in Q1 2013—a drop of approximately 5%. Transaction activity was dominated by the National Capital Region (NCR), Bangalore and Chennai—representing about 70% of the total space transacted during the quarter. The IT/ITeS, financial and services segments continued to drive demand for office space, according to the findings of CBRE’s latest report, India Office MarketView Q1 2014.

New office space supply in the leading cities was also affected due to existing vacancy levels and lower demand. About 6.6 million sq. ft. of fresh office space was completed in Q1 2014, compared to about 10 million sq. ft. in Q1 2013—a y-o-y decline of about 34%. Bangalore led project completions, followed by Delhi NCR and Mumbai—together contributing to more than 80% of the total office space addition in the quarter under review.

Commenting on the findings of the report Mr. Anshuman Magazine, Chairman and Managing Director, CBRE South Asia Pvt. Ltd. said, “Occupiers continue to remain focused on optimal space utilization and cost saving strategies. Going forward, 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 upcoming 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..”

Rental trends exhibited mixed sentiments across micro-markets on q-o-q basis.. Rental values in the Central Business Districts of Delhi, Bangalore, Chennai and Pune appreciated in the range of 2–5% q-o-q due to increasing occupier interest in leading Grade A properties. In Mumbai, meanwhile, feeble demand levels continued to have a negative impact on rentals across markets, with values dipping by 2–5% q-o-q in Nariman Point, the Bandra–Kundra Complex, Worli and Prabhadevi—mainly due to weak occupier demand and existing vacancy pressures.

Overall, the commercial real estate market in India saw sluggish transaction activity and a low level of new completions during Q1 2014. Leading cities across the country 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.

 

Disclaimer:

Neither CBRE nor its affiliated companies make any warranties or claims on the implied accuracy of the information contained herein.
 

About CBRE Group, Inc.

CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2016 revenue). The company has more than 75,000 employees (excluding affiliates), and serves real estate investors and occupiers through approximately 450 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.​

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