Buoyed by an absorption rate of 38 per cent, Ahmedabad is set to add office space of 1.5 million sq ft in the coming year, says a Cushman & Wakefield report. According to the real estate consulting firm, despite the rise in office space supply, developers may witness high mortgage rates and continued liquidity crunch.
"The city is expected to receive a supply of 1.5 million sq ft in the coming year. However, developers may face difficulty in the near term with high mortgage rates and a liquidity crunch which could put further pressure on upcoming supply," the report states.
Registering a growth of 38 per cent as compared to 2010, Ahmedabad saw an absorption of 426,300 sq ft in 2011. What's more, regions like SG Highway and Satellite Road contributed 61 per cent of the total absorption in 2011. In the fourth quarter of 2011 alone, Ahmedabad saw an office space absorption of 100,430 sq ft.
However, the demand for office space has been on a decline due to global slowdown, says Cushman & Wakefield report.
"A global slowdown coupled with slower GDP growth in India has led to a decline in demand for office space in Ahmedabad in the fourth quarter of 2011. Developers are also adopting a wait-and- see attitude which has resulted in reduced supply," the report states. Hence, Ahmedabad witnessed a total supply of around 437,000 sq ft for the year and 130,000 sq ft for the fourth quarter.
Moreover, there was a 14% drop in supply compared to 2010. S.G. Highway attributed for 56% of the year's supply primarily along the route to Gandhinagar.
As per the report, no pre-commitments were recorded in the office space for the quarter.
Ahmedabad witnessed an increase in vacancy levels to 11 per cent from nine per cent in the previous quarter. Vacancy levels were highest at Ashram Road at close to 20 per cent. The unabsorbed supply was the primary reason for increase in vacancy levels. Ashram Road witnessed high vacancy levels.
While rentals have remained stable in the fourth quarter, the commercial business districts (CBD) areas may see an increase in rentals in near future, the report forecasts.
"The rental stability in fourth quarter can be attributed to high vacancy levels and an upcoming supply, Demand was driven primarily by the banking sector and small enterprises. CBD areas may witness an increase in rentals due to limited Grade A office supply. However rentals are expected to remain stable across other micro markets with moderate demand and current vacancy levels," the report further stated.
