The quantum of large commercial space leased out dipped sharply last quarter. While Delhi saw a drop of 91% sequentially and 66% over the March quarter, the trend in Mumbai was only slightly better — the fall was 50% sequentially and 62% over the January-March period. Indeed, there seem to be few takers for office space of more than 1 lakh square feet — just 1.2 lakh sq ft was rented in Delhi in the September quarter while in Mumbai the area was 2.5 lakh sq ft.
Rohit Kumar, head of India research, DTZ, which tracks the data, points out that while such large transactions do take between six and nine months to get done, it’s a fact that the sentiment is subdued in a slowing economy. India’s gross domestic product of 5% for FY14 was at the lowest level in a decade. With elections due in several states and general elections due in 2014, corporate decision-making has slowed.
Activity in the commercial real estate is definitely slowing. In the July-September period, absorption of office space declined 20% quarter-on-quarter in seven cities to 68 lakh sq ft, says DTZ in its latest report. The decline would be closer to 15% over the same period last year.
Anshuman Magazine, CMD, CBRE South Asia, confirmed that the substantial drop in India’s GDP growth and an uncertain environment have hurt corporate growth and expansion, resulting in a drop in office absorption across key metros.
Some of the key transactions in 2013 include Axis Bank leasing 2 lakh sq ft in Gigaspace Building 2, Mindspace, the eastern Mumbai suburb of Airoli for nearly R10 crore annual rent, say sources. Johnson & Johnson’s take-up of 1 lakh sq ft and Walt Disney’s 1.25 lakh sq ft in Andheri are believed to be for R10 crore and R23 crore annual rent, respectively. In Delhi NCR, Fiserv is understood to have picked up 2 lakh sq ft space in DLF IT Park, Noida, for about R10 crore, and Convergys leased almost 2.3 lakh sq ft in Gurgaon for close to R20 crore, say sources.
Deal values too are low as occupiers opt for cheaper office locations in the suburbs, preferring to lease than to buy. Smaller spaces are being rented as companies cut back on costs.
In the first nine months of 2013, Mumbai, for example, saw the share of lease transactions for less than 10,000 sq