DELHI: The impact of the slowdown is being felt on the office market with leasing of space dropping by 20% in the July to September quarter of 2013 compared to the previous quarter, says a DTZ report. Corporates leased 6.8 million sq ft of space in the quarter.
Despite a 32% drop in office space take up in the quarter, Bangalore saw the highest take up of space-2.9 million sq ft-- continued to accounting for 42% of the total demand for space across the top seven cities.
Leasing activity in Delhi NCR was down 27% quarter-on-quarter.
Kolkata and Chennai were the only cities that recorded a growth in take up of office space-28% and 17% q-o-q respectively.
"The dip in Q3 2013 take-up highlights the prolonging of the depressed market conditions prevailing in India. This is also due to the fact that the previous quarter saw a few large ticket size deals which were absent in Q3 2013," says Anshul Jain, chief executive of property consultancy DTZ.
This situation, he says, is unlikely to reverse in the short term, especially with the elections round the corner and prevailing economic uncertainty.
The total stock of commercial grade A office space in India's top seven cities stood at 419.4 million sq ft at the end of Q3 2013 compared to 413.7 million sq ft in the previous quarter. The overall vacancy rate increased in the quarter to stand at 20.3% or 85 million sq ft, which is a reflection of the sharp drop in demand for space during the period coupled with infusion of new supply.
Hyderabad witnessed the steepest increase in absolute vacancy of 19% q-o-q followed by Bangalore, which witnessed a 16% increase q-o-q due to the addition of a large amount of new supply. The vacancy rates in these two cities stood at 12.6% and 14.2% respectively at the end of the quarter.
Except Mumbai, rentals across the cities remained unchanged. In Mumbai, rentals in the central business district continued to decline because of slackening demand and also because of occupiers preferring locations in off-CBD and suburban micro-markets. The prime rents in Mumbai CBD further dropped by 5% q-o-q.
"The rents in most micro markets are looking very attractive from an occupier perspective and the next six months are a very good time for corporate occupiers to consider relocation. It's a great time to capitalize on the market conditions and lock in long-term leases at very competitive prices," says Jain.