Office space supply falls sharply by over 75% in Jul-Sept

Office space supply fell by more than 75 per cent during July-September period in the top seven cities compared with the previous quarter due to high vacancy in completed buildings and poor commitments in the under- construction projects, according to property consultant CBRE.

"Less than 3 million sq ft of office space entered India's prime real estate market in the quarter ending September 2013 — dropping by more than 75 per cent q-o-q over last quarter's 10 million sq ft of fresh office space supply and by nearly 50 per cent over the same period last year," CBRE South Asia Pvt Ltd Chairman and Managing Director Anshuman Magazine said.

The July–September period witnessed the lowest addition of office space over the past several quarters, he added.

According to CBRE's India Office Market View, the total office space supply in the seven major cities stood at only 25.41 lakh sq ft during July-September period against 108.04 lakh sq ft in the previous quarter.

The quarterly report provides a summary of office space movement across the seven major cities- NCR, Mumbai, Chennai, Kolkata, Pune, Hyderabad and Bangalore.

Delhi-NCR accounted for just about 12 per cent of the total supply addition in the seven cities. Office supply in NCR declined to mere 3.24 lakh sq ft in July-September as against 15.53 lakh sq ft in the previous quarter.

Bangalore experienced the steepest decline in office space addition where supply fell to 3.5 lakh sq ft in July-September compared with 35.83 lakh sq ft in the previous quarter.

"This rationalisation of office space supply across the top urban centres of the country has been largely attributable to the prevailing high vacancy pressures in completed projects and poor commitment levels for under-construction properties," Magazine observed.

The corporates have shifted their focus to consolidation/ relocation and more efficient use of their existing real estate portfolio since the last one year, he said, adding that the trend could continue in the medium-term.

"According to our report, owing to a slowdown in construction activity, pent up supply has been lined up across various micro-markets for release over the next six to nine months, which might result in pressures on asset pricing," Magazine said.