DELHI: Leasing of office spaces in India's top seven cities fell by 14 per cent to around 6 million sq ft during July-September compared with the previous quarter with corporates still being cautious about expansion amid subdued economic outlook, property consultant CBRE said.
The weak demand for office spaces hit supply drastically with less than 3 million sq ft of new space added during the July-September against about 10 million sq ft in the previous quarter. The office rentals were also largely stable.
"A sluggish global economy, a substantial drop in India's GDP growth, uncertainty, volatile currency, high interest rates, etc. have been a deterrent for corporate growth and expansion. The has resulted in declining office absorption across the key metros in the country," CBRE South Asia Pvt Ltd Chairman and Managing Director Anshuman Magazine said.
According to the CBRE's 'India Office Market View Q3 2013' report, the office space absorption in the top seven cities of the country declined by about 14 per cent quarter-on-quarter registering around 6 million sq ft as compared to around 7 million sq ft in the previous quarter.
These top seven cities are National Capital Region (NCR), Mumbai, Bangalore, Chennai, Hyderabad, Pune and Kolkata.
"Corporate office occupiers remained cautious amid a subdued economic outlook, a trend which continued to inhibit office leasing activity across the country," it added.
The demand for office space weakened in most markets as corporates continued to optimize their portfolio (downsizing in certain instances), focus upon consolidating their realty footprint and opt for relocating to peripheral locations.
The transaction activity was dominated by the NCR, Mumbai and Bangalore, each recording more than a million sq ft of office space leasing during the review period.
Gurgaon in the NCR, Lower Parel, Andheri, Goregaon and Navi Mumbai in Mumbai and the Outer Ring Road in Bangalore were the most preferred locations for office space leasing.
"The July-September period witnessed the lowest addition of office space over the past several quarters, largely due to the prevailing high vacancy pressures in completed projects and poor commitment levels in under-construction properties," the report said.
The rental values remained largely stable as occupiers faced cost pressures, and consolidation continued to be the key theme, CBRE said.
Owing to increased occupier interest in leading Grade A properties, marginal appreciation to the tune of 2-3 per cent was observed in the central business districts (CBD) of Delhi, Bangalore, Chennai and Pune.
Interestingly, Mumbai's Nariman Point and Bandra Kurla Complex were the only micro-markets which saw a marginal rental drop, owing to sluggish demand and a preference for the city's cost-effective peripheral locations.
On the outlook, the consultant said rental and capital values are likely to remain under pressure in most micro- markets in the short to medium term on expectation of a large supply addition.