The first six months of the current calendar has seen office space absorption decline 11% on a year-on-year basis to 12.5 million sq ft according to a Cushman and Wakefield report.
The first six months of the current calendar has seen office space absorption decline 11% on a year-on-year basis to 12.5 million sq ft according to a Cushman and Wakefield report. “Tapering supply has largely been responsible for the slowdown,” said Anshul Jain, managing director, Cushman and Wakefield, adding that IT-BPM (business process management) companies have maintained a cautious approach.
The fall in the office absorption space comes after registering growth in the last three years but analysts had expected a slowdown since the IT industry wasn’t exactly expanding but cutting jobs. Though job cuts in the IT industry have not been as big as anticipated, it is clear that companies have not expanded as per their earlier run rate.
The crash is large-scale and across the board, with the exception of Chennai. Bengaluru, which is considered the strongest as well as the most resilient market also saw absorption levels decline by 28%; space take up in Delhi NCR dropped by 22% whereas markets like Mumbai and Pune remained largely flat. Businesses are cyclical, after consistent performance for the last few years, a lull is natural, said Irfan Razack, chairman and managing director of Bengaluru-based, Prestige Estates. The lower absorption does not dent the fundamental strength of the segment, Razack reiterated.
As Jain pointed out, upcoming supply is also significantly lower when compared to last year. In Bengaluru supply declined by 23%; Mumbai witnessed a drop of 72% and Delhi NCR too saw a slide of more than 40%. The commercial segment turned a new corner about three years back, when absorption rates started escalating consistently.