Bangalore Office Space Absorption Shrinks

Published on July 17, 2013, 01:20 AM IST
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The office space absorption in Bangalore during H1 2013 at 1.6 million square feet (msf) was a drop of around 22 per cent over H1 2012. But, it was nearly seven times than the previous quarter due to certain pre-commitments getting absorbed (around 50 per cent of the net absorption) and expansion by certain companies in the manufacturing and online retail categories. The market exhibited signs of healthy demand with pre-commitments adding up to approximately 1.9 msf unlike previous quarter where there were none.

According to real estate consultants, Cushman & Wakefield, Outer Ring Road being a preferred location with its proximity to residential catchments and good connectivity to central and suburban regions witnessed about 74 per cent of the total pre-commitments. The city witnessed an addition of 1.6 msf of fresh office space in Q2, which remained in a similar range as of the first quarter. Outer Ring Road continuing to be a favoured workplace location also saw 94 per cent of the total supply. The first half of the year again saw a drop of approximately 34 per cent in supply compared to the same period last year.

The overall vacancy was recorded at 14.5 per cent, a slight dip of 0.2 percentage point from the last quarter.

Rentals across the markets remained in similar ranges with the exception of suburban micro-market, which experienced a rise in rentals in the wake of a healthy demand for second generation spaces by IT-BPM companies. Observing the quantum of RFPs getting floated in the market, leasing activity is expected to see an uptrend going forward. Further, the rentals are expected to hold on to their current levels in short to midterm.

This decline in Bangalore was in line with trend seen across India, where the total net absorption across top eight cities in H1 2013 was noted at 10.9 million square feet which denoted a decline of 15 per cent compared to the same period last year. Slower economic growth led to the decline in expansion by companies as cautious sentiments continued since the beginning of the year. While the skepticism was very apparent in the first quarter of the year, the second quarter saw a marked improvement in the total office space absorption.

Sanjay Dutt, Executive Managing Director, South Asia, Cushman & Wakefield, said, "The office real estate market has been able to keep afloat in the midst of the negative market sentiments, which include poor GDP growth projections, depreciating value of Rupee against dollar, political volatility and continued unrest in the global economic conditions. Even while absorption registered a fall of 15 per cent year on year, the second quarter of 2013 has outperformed on both accounts of year- on - year as well as quarter -on - quarter, indicating an existing strain of growth that is still visible in the corporate world. Even though corporates have been cautious in their expansion, the trend has been positive, albeit slow. By the end of the year ,,ffice space absorption is expected to be at approximately 30 msf with markets such as Bangalore Pune and Mumbai leading the trend."

courtesy - BusinessStandard