With hardly any new supply adding up to the current office space segment in Ahmedabad, the city has registered the lowest vacancy of 5-6 per cent in a recent study by real estate consulting firm Cushman and Wakefield.
According to the report, vacancy levels had remained largely consistent to last quarter with most IT/ITeS destinations witnessing high vacancy levels. "The lowest vacancy was recorded in Ahmedabad at 5-6 per cent due to limited leasing activities and no new supply in the market.
Mumbai recorded a vacancy of approximately 11-12 per cent while vacancy levels in NCR stayed at a manageable 8-10 per cent. Chennai’s peripheral location (Rajiv Gandhi Salai) recorded the highest vacancy of approximately 42 per cent while the city average was at approximately 18 per cent," the report said.
"The first quarter of the year can be termed as the weakest so far in terms of commercial office take up across major cities in India as compared to a similar period for the last 2/3 years. As evident, markets moved towards an over supply situation mostly in response to plummeting demand from the key sectors such as BFSI and IT/ITeS. Re- negotiations and migration to more cost effective locations has been the norm for the cautiously advancing corporate sector," said Kaustuv Roy, executive director of Cushman and Wakefield.
However, Roy added that going forward the industry is likely to see supply contraction. "Acutely affected areas like IT/ITeS and certain corporate office destinations will see deferment of projects to bridge the gap between supply and demand. While rental values are expected to be under pressure in short to medium term, going forward lower rentals are likely to have a more positive impact on the absorption numbers," he added.
Also, rentals across all markets saw a downward trend with a further softening bias in Q1 2009. In terms of new office space supply, while Bangalore witnessed highest supply of approximately 2.81 million sq ft, Hyderabad and Ahmedabad saw no addition to the current stock.
In NCR, Gurgaon saw a correction of approximately 19 per cent in first quarter of 2009 due to influx of supply but restricted demand. CBD – Prime in NCR witnessed a correction of approximately 17 per cent largely due to occupants opting for more cost effective options. Markets like Pune, Kolkata and Hyderabad where growth was essentially driven by IT/ITeS and BFSI back office operations, saw a slump in uptake of space leading to rental corrections ranging from 5 –20 per cent. Bangalore market remained the most dynamic through Q1 2009 with restricted corrections in the range of 3- 7 per cent largely due to a decline in demand for SEZ properties.