The office property markets have continued to post growth over the past few years. However, the last few quarters have witnessed a polarisation of the markets in terms of growth in demand across the country, reports Jones Lang LaSalle Meghraj in its second quarter 2008 Asia Pacific Property Digest (APPD), a comprehensive quarterly report providing market update, significant trends in office markets in India.
It is increasingly becoming evident over the last two quarters that micro markets which are dependent on demand from IT/ ITeS occupiers, are likely to be more sensitive to the occupation cost variations as compared to those markets which derive demand from non IT/ITeS occupiers.
This is evident from the fact that many of the CBD areas in cities such as Delhi, Mumbai, Chennai, Hyderabad, Bangalore and Kolkata continue to enjoy captive demand from corporate occupiers mainly from BFSI, consulting and other service industries. The consistency in most of these office markets is also attributable in part to the relatively limited growth in the supply pipeline over the last few years, the report said.
Anuj Puri, chairman and country head, Jones Lang LaSalle Meghraj said, ?It is interesting to note that the ?high potential? office micro markets, anticipated to clock increased growth in demand, would do so essentially on the back of affordable product values, improving infrastructure and enhanced product being delivered. It is expected that over the next 8-10 quarters, such markets could witness strong pre-leasing commitments by occupiers despite robust supply pipelines, which are in place.?
In case of the susceptible markets, demand from occupiers in the IT/ITeS segment, can be rationalised on the back of economic slowdown in the US. This, coupled with the strong supply pipeline in many of these markets, can lead to a potential consolidation in the respective markets, leading to relatively higher vacancies, although, this may not immediately manifest itself in any marked rental consolidation in such markets.
In terms of new office supply completions in the first half of 2008 as compared to same period in the previous year (2007), it is interesting to note that the cities (including all micro markets) that have clocked the highest positive growth rate in terms of delivered supply on a year-on-year basis are Kolkata, Chennai, Mumbai and Delhi. In fact, Bangalore and Hyderabad are two cities which have actually posted negative growth in terms of stock completion in first half of 2008 vis-a-vis same period 2007. A remarkable insight to note is that Hyderabad, Delhi, Mumbai, Chennai and Bangalore have more than half of the total expected office stock completions planned to be delivered in the remaining half of 2008.