By: Anshuman Magazine, CMD, CBRE South Asia
Track2Realty: 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% q-o-q over last quarter’s 10 million sq.ft of fresh office space supply; and by nearly 50% over the same period last year.
Delayed deliveries from previous quarters, along with new projects coming on-stream, had led to an increase of upto 8% q-o-q and about 16% y-o-y in office supply addition in the previous April–June period; but the July–September period, however, witnessed the lowest addition of office space over the past several quarters, according to our India Office Market View report for the third quarter of this year.
Mumbai led these project completions (36%), followed by Hyderabad (27%), Bangalore (14%) and Delhi NCR (12%)—representing about 88% of the entire office space added during the third quarter of 2013. Despite leading the total space addition to India’s existing office stock in Q3 2013, Mumbai’s office supply for the quarter actually declined by more than 50% q-o-q over the previous quarter.
Bangalore, in fact, experienced the steepest decline in office space addition in the third quarter, falling by approximately 90% q-o-q over Q2 2013, and by 65% y-o-y over the same period last year. Delhi NCR accounted for just about 12% of the total supply addition; declining by nearly 80% q-o-q over Q2 2013, and by over 80% y-o-y over Q3 2012.
This rationalization 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.
More than 10 million sq.ft and nearly 9 million sq.ft of fresh office space had entered the Mumbai and Bangalore markets, respectively, over the last four quarters. Amid a backdrop of subdued demand, double-digit vacancy rates and poor commitment levels for under-construction buildings—it is understandable that the top three cities witnessed an average office space supply addition of about 0.53 million sq.ft in the third quarter of 2013.
Corporate occupier focus had shifted to consolidation/relocation and more efficient use of their existing real estate portfolio over the past year—a trend which has continued to the present quarter, and is likely to 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.
1 Comment
Anonymous, I have lived in Chandigarh for most of my life, so I am sure somewhere I was lonikog for that kind of a city only. But since its been almost 10 years that I am out of that city, and I don;t know how it has grown in these years, I did not mention it. But yes, that may be the city closest to a dream city.Shivaji, Bay area is a good example of distributes cities, but again I have always visited that area, never really lived there. Samba, looks like you have always lived in a big cities. Small cities are equally good if not better, its just that when you live in big city, you start thinking that no other city has these facilities. I have different views on rural consumerism, will writw about that sometime.Parth, we all find out the ways to utilize this time, but would you really like to spend time that way, specially in India where driving is not as much a pleasure, at least within the city limits of any big city.Thanks for writing in guys…I am thinking loud, but can we do something to have smaller well developed places, rather than a 1 Billion+ population trying to run to 5-7 major cities. -Anu