Cover Story
high. Sales have failed to pick up in these metros on ac- count of the global slowdown. Moreover, the nature of busi- ness of most of the company’s expanding in these metros is Non-IT in nature which has further reduced their prob- ability to expand. Also, most of the IT companies are looking to expand in cities where there is a larger supply of IT / IT-SEZ spaces and where rental levels are lower and the companies can avail long term tax ben- efits. Hence there is still de- mand for commercial spaces in cities like Bangalore & Pune – though there hasn’t been growth in the Y-O-Y demand. Hence the overall market sce- nario is a bit sluggish.
“When the markets were re- covering from the great reces- sion of 2008, developers were trying to speculate upon the recovery timelines. They spec- ulated that the markets would recover from the crisis by the end of 2011 and demand in 2012 would return to pre- 2007 levels. However, with the European debt crisis hovering dangerously and an imminent slowdown in the US, things are not looking very bright. The commercial office stock – planned way back in 2008 – 2009 is now being supplied to the market. Without any takers for these spaces – there is a huge oversupply resulting in lowering of the rentals,” says Gautam.
Adds Parthajeet Sarma, Direc- tor, Projectwell Management Pvt. Ltd., “the oversupply came as a result of developers not seeing the writing on the
wall as they continued to build as per demands of the 2006- 2007 period. Multinational companies and Indian compa- nies alike have put their expan- sion plans on hold, and wait for the economy to show signs of recovery. This has created a huge gap between demand and supply. As a result rentals have dropped in certain busi- ness districts whereas they have remained steady on oth- ers. No rise in rentals has been seen in recent years.”
developers and long term play- ers who have conceptualized office space products keeping in mind the end user and its requirements like work force convenience, brand image and quality of work space / ameni- ties offered, would remain untouched with any skewed demand supply situation in future, as they would have had pre commitments from pro- spective tenants for occupa- tion,” says Mohit Verma, Head Commercial (Sales & Leasing), Raheja Developers Ltd.
Demand Matters During Q1 2012, southern cities of Bangalore, Chennai and Hyderabad witnessed absorption of ~ 4.5 million sq. ft of Grade A office space with Bangalore leading the cities in office space absorption. “Fur- ther owing to expansion plans by IT/ITeS companies and high pre-commitments, absorption levels in these cities is likely to remain on a higher side in coming quarters; rental values
Parthajeet Sarma, Director, Projectwell Management
The cumulative office space absorption for the top 8 cities in India fell in Q1. “Whilst Q1 saw subdued office absorp- tion, majors in the IT/ITeS and domestic BFSI sectors have indicated expansion plans, projecting strong demand for office space during the year in the coming months. Devel- opers may control construc- tion activity in over supplied regions so as to keep supply in line with the demand result- ing in stable rentals during the second half. All far sighted
Singh, Business Head,
99acres.com
GIREM 101 7
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