Supply of commercial real estate halved in March quarter: PropEquity

Despite a lower supply, the vacant stock has remained relatively stable, pushing the rents of commercial real estate higher

The supply of commercial real estate in India's tier-1 cities more than halved in the quarter that ended on March 31, as compared with the same quarter last year, property consultancy PropEquity said in a report on Tuesday.

According to the "India's Commercial Market: Real Estate Overview" report, the new supply of commercial space has gone down 51 per cent to 7.93 million square feet (mnsft) from 16.10 mnsft in the same quarter last year.

The supply also saw a sharp dip of 43 per cent on a quarter-on-quarter (QoQ) basis. In the quarter that ended on December 31, 2022, the supply of commercial space was 13.9 mnsft.

Despite a lower supply, the vacant stock has remained relatively stable. As compared with 144.03 mnsft in Q4FY23, it has gone down four per cent to 141.18 mnsft in the quarter that ended on March 31.

Consequently, the rent of commercial real estate in the major Indian cities, except Pune, has gone up in the range of 8 to 36 per cent.

"The reduced supply has caused rental prices to surge, emphasising the significance of agility and strategic decision-making for businesses searching for suitable commercial spaces," said Samir Jasuja, founder and chief executive officer (CEO) of PropEquity.

At 36 per cent, the highest rise in rent was noted in Bengaluru. It was followed closely by Hyderabad at 34 per cent and Mumbai Metropolitan Region (MMR) at 16 per cent.

Pune was the only major city that saw the rent fall by 11 per cent.

The report added that Mumbai had the highest rent for commercial space at Rs 134 per square foot. It was followed by Delhi-NCR at Rs 102 per square foot and Bengaluru at Rs 94 per square foot.

"While this poses challenges for companies seeking new locations, it also unveils exciting investment prospects in existing properties. To successfully navigate this evolving real estate landscape, industry players must remain well-informed and adopt innovative strategies that adapt to the market dynamics," Jasuja added.