23 percent increase from the last year's absorption
With the city already carrying adequate availabilities to meet current demand, Ahmedabad witnessed a slowdown in construction activity in 2010. As a result, the city recorded a drop in absorption of office space by six per cent as compared to 2009.
According to a study by real estate consulting firm, Cushman & Wakefield, while the office space supply rose from 280,000 sq.ft. in 2009 to 510,000 sq.ft. in 2010, the absorption dropped from 330,000 sq.ft. in 2009 to approximately 308,000 sq.ft. this year. However, Ahmedabad saw telecom, banking, financial services and insurance (BFSI) and small corporates continue to be the major demand drivers for office space in the city.
Nationally, the report indicates total commercial space absorption of 32.65 million sq.ft. in the major Indian cities alone, which is a 23 percent increase from the last year's absorption of 27 million sq.ft. Fresh absorption formed a significant contributor to the overall yearly consumption numbers accounting for 91 percent (30 million sq.ft.). Bangalore continued to witness the highest space take up in the country (9.9 million sq. ft.), while Hyderabad (96 per cent over last year) saw highest growth in absorption followed by NCR (42 per cent over last year).
Similarly, fresh pre commitments for office space created in 2010, due to be absorbed over the next two years, amounted to 9.2 million sq. ft., which is double of last year's 4.7 million sq. ft. and stands testimony to the growth plans by the corporate sector. Almost all the major cities recorded pre commitments of commercial office space in 2010 with Bangalore, Mumbai and Pune being the most significant ones registering over one million sq.ft.
Talking about the buoyancy in major cities, Arvind Nandan, executive director, occupier services, Cushman & Wakefield India, said, "The pre commitments are back and it is a healthy indication of the revival of the office markets. This also signifies that the corporate sector has been actively planning their expansion strategies which were deferred earlier due to the unfavourable economic environment. There is also a shift in demand for space in SEZ developments where major pre commitments have been recorded. It is expected that the demand will continue to rise throughout the coming year which will also see an increase in construction activities."
Back in Ahmedabad, buoyant demand coupled with restrained supply resulted in rental appreciation in latter half of 2010. Rentals in the city registered an annual appreciation of 6 to 10 per cent. S.G. Highway and C.G. Road emerged as the most preferred location for office space demand resulting in a rental appreciation of 10 per cent and 6 per cent respectively, the report stated.
Overall supply in 2010 was recorded at 43 million sq.ft. which is 17 per cent less than 2009. The report attributed the cause to the cautious approach adopted by developers in order to control the high vacancy of approximately 20 per cent in the market. However, the total estimated supply for the year was 53 million sq.ft. of which around 81 per cent was realised. SEZ supply for the year recorded at approximately 9.2 million sq. ft. witnessed a drop by 30 per cent from the previous year. Bangalore accounted for the highest SEZ supply this year, followed by NCR and Hyderabad. Meanwhile, the revival in demand in 2010 and controlled supply of projects have helped to tame the vacancy level currently estimated to be 16-17 per cent.