Office space demand slowed down in the first quarter of 2014, with around 6.3 million square feet of office space getting absorbed across the leading cities of the country as against 6.6 million square feet in January-March 2013 period—a drop of around 5%, CBRE’s latest report, India Office MarketView Q1 2014 said.
Transaction activity was dominated by the National Capital Region (NCR), Bangalore and Chennai—representing about 70% of the total space transacted during the quarter. The IT/ITeS, financial and services segments continued to drive demand for office space, the report said.
New office space supply in the leading cities was also affected due to existing vacancy levels and lower demand. About 6.6 million sq. ft. of fresh office space was completed in Q1 2014, compared to about 10 million sq. ft. in Q1 2013—a year-on-year decline of about 34%. Bangalore led project completions, followed by Delhi NCR and Mumbai—together contributing to more than 80% of the total office space addition in the quarter under review.
“Occupiers continue to remain focused on optimal space utilization and cost saving strategies. Going forward, demand is likely to be concentrated mostly in the peripheral micro-markets of leading cities, owing to abundant availability of cost effective quality space options," Anshuman Magazine, chairman and managing director, CBRE South Asia Pvt. Ltd. said.
Rental trends exhibited mixed sentiments across micro-markets on quarter-on-quarter basis. Rental values in the central business districts of Delhi, Bangalore, Chennai and Pune appreciated in the range of 2–5% q-o-q due to increasing occupier interest in leading Grade A properties. In Mumbai, meanwhile, feeble demand levels continued to have a negative impact on rentals across markets, with values dipping by 2–5% q-o-q in Nariman Point, the Bandra–Kundra Complex, Worli and Prabhadevi—mainly due to weak occupier demand and existing vacancy pressures.