Led by the improvement in economic sentiment, which seems to have boosted the confidence of the corporate sector, demand for corporate office space in the second quarter of the current calendar year (April ? June 2009) grew 65% at 5.66 million sq ft compared with the first quarter, real estate consultant Cushman & Wakefield said in its latest report released on Thursday.
According to the report, Bangalore saw the highest demand of approximately 1.29 million sq ft. Other significant rise was noted in Mumbai where demand rose 191%, largely concentrated in the Bandra Kurla Complex. Delhi?s national capital region (NCR) saw a rise in demand by 43% over the previous quarter at approximately 9,40,000 sq ft. ?
However, supply continued to outstrip demand by over 50% during the period, increasing the average vacancy across major cities to over 13% – 18%. The report claims that the enquiries for office space have increased over the previous quarter even though the actual transactions were low. ?
Peripheral locations of most cities registered remarkably high vacancies. The highest vacancy was recorded in Pocharam, Hyderabad, at approximately 77%, which incidentally was an improvement over the previous quarter. Chennai?s GST Road also witnessed high vacancy of approximately 44%.?Kolkata?s peripheral areas and peripheral areas of Whitefield and Electronic city in Bangalore recorded vacancies of 28% each. Mumbai and NCR witnessed average vacancies of 14% and 11%, respectively, which were one of the lowest average city vacancies. ?
The report also says that?rental corrections ranged from 3% to 10% across most micro markets in key cities of the country. The highest correction was recorded in Thane (IT space) which saw a decline of 25% on account of low demand. Other locations which registered the highest corrections within their respective city include NCR secondary central business district (including Nehru Place and Jasola Vihar) which recorded a correction of 8% over the previous quarter. Bangalore?s suburban locations recorded a correction of 12% while Nagar Road in Pune registered a drop of 14% in rental values over the previous quarter. Rajarhat and Salt Lake in Kolkata witnessed a uniform drop of 11% over previous quarters.
Arvind Nandan and Sumit Rakshit , executive directors, Occupiers Solutions, said, ?Even while the quarter continued to see subdued demand from the corporate occupiers, the second quarter saw increase in office space enquiries. Many corporates who were looking at occupying space during this quarter withheld their decisions to monitor the political conditions and the Union Budget. An over-arching belief is that prices have reached their lowest price points and the markets should be largely stable, with corrections only restricted to peripheral locations and IT/ITeS corridors.?
Thus corporate occupiers are likely to act more positively over the next six to nine month period”.?
The Delhi NCR market was largely stable in terms of rental values in Q2 09 with values remaining at manageable levels of 1% to 8%. Mumbai continued to remain volatile in terms of rental values. Bandra ? Kurla Complex (BKC) corrected by another 20% over the previous quarter. Bangalore witnessed a quarter of restrained activity which saw infusion of 850,000 sq ft largely in response to low demand from occupiers. Chennai saw an infusion of approximately 2.2 million sq ft of new supply spread across suburban and peripheral micro markets while total absorption was1 million sq ft. Pune and Kolkata continued to witness further rental corrections in Q2 09 owing to the low interest from corporate occupiers and higher supply. Both markets, heading towards an over supply situation are likely to see further additions thereby increasing vacancy rates.