Rentals during the three months to December were largely stagnant across most micro markets, though there was some pressure in Nariman Point and Bandra Kurla Complex (BKC); rents were down 4% sequentially and and nearly 13% y-o-y to Rs 240 per sq ft per month in Nariman Point. The fall has been less sharp in BKC where rents have fallen 1.8% q-o-q and nearly 7 %y-o-y to levels of Rs 270 per sq ft per month. Meanwhile, Delhi NCR has seen an uptick in business with seven large deals across 12.19 lakh sq ft; thats more than twice the space transacted during October-December 2012. In July-September 2013, just 1.2 lakh sq ft was absorbed.
In Gurgaon and Noida areas, rentals remained unchanged at Rs 91 per sq ft, per month and Rs 40 per sq ft per month, CBRE data shows. Among those renting are understood to be Aon Hewitt which needed 4 lakh sq ft in Uniworld Towers in Gurgaon, Panasonic which has picked up 2.2 lakh sq ft in Amience Commercial Tower, Gurgaon and Evalueserve which has leased 1.5 lakh sq ft in Unitech Tikri, Gurgaon.
Activity in commercial real estate, across seven cities, saw a slight improvement towards the second half of 2013. About 8.2 million sq ft of office space was closed out in Q4CY13, up 35% q-o-q and 14% y-o-y, CBRE's India Office Market View confirms.
Many corporates have put their investment decisions on hold and are waiting to see how the economy unfolds. Companies are looking to bring down costs rather than taking up additional office space, says Amit Oberoi, national director (valuation & advisory services & research), Colliers International.
India's GDP growth of 5% for FY13 was the lowest in a decade, and the sluggishness has persisted in the three quarters of the current financial year as well. With several Assembly elections general elections scheduled for this year, corporate decision-making has slowed.
The trend of occupiers scouting for cheaper office locations in the suburbs and a preference of leasing rather than outright purchase, is seen on the rise. This is leading to abundant cost-effective office spaces coming up in the peripheral areas of cities, which are seeing good demand as well as absorptions.
Going forward, demand is most likely to be concentrated in peripheral micro-markets of Indias leading cities, owing to the abundant availability of cost-effective, Grade A office space options. Occupiers belonging to the IT/ITeS, banking/financial services and pharmaceutical sectors are likely to drive the demand for office space; and contribute significantly to overall office space absorption levels, says Anshuman Magazine, chairman and managing director, CBRE South Asia.
Interestingly, the share of lease transactions for less than 10,000 sq ft has risen to 39% in Mumbai, in the first nine months of 2013 compared to 2012. Meanwhile, the share of transactions above one lakh sq ft, have remained stagnant at 11%, data from Jones Lang LaSalle (JLL) India shows.