Office space absorption, which has consistently been rising during the past three to four years, will either remain flat or may witness a slump at the end of this year, an estimate released by Cushman and Wakefield said. The firm has estimated that net absorption will reach 30 to 32 million sqft, similar to the previous year. In the first nine months of the year, absorption declined steadily across the eight major cities of the country.
The decline has been mainly attributed to supply-side constraints. “Overall there is a drop of 38%; main cities like Mumbai and Pune saw a decline of more than 50% and even Bengaluru recorded lowest quarterly supply seen in the past couple of years,” said Anshul Jain, managing director at Cushman and Wakefield (India).
But the sector is also witnessing a slower pace of construction than anticipated, Jain added. Except Chennai, every other market is registering lower absorption levels compared to last year.
According to industry experts, although job cuts in the IT industry have not been as much as apprehended, the industry is not exactly on an expansion mode.
Other fast-growing segments such as e-commerce firms are also more focused on consolidation now after having come under the scanner from investors.
As Jain pointed out, the supply crunch is palpable, with both Mumbai and Pune coming under pressure by more than 50%, Ahmedabad registering an 86% drop, Bengaluru recording a 22% decline and Hyderabad and Chennai declining by 30% and 47%, respectively. The absorption decline is the steepest in Ahmedabad (37%), followed by Bengaluru (17%) and Hyderabad (13%).