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Office space absorption fell by 15% during the first half of this year in eight major cities of the country as corporates are cautious on expanding their business due to slower economic growth, according to property consultant Cushman & Wakefield.
"Office markets in India registered a downward trend in absorption in the first half of the year (January-June 2013)," Cushman & Wakefield said in a statement.
The total net absorption across top eight cities in H1 2013 was 10.9 million sq ft, a decline of 15% compared to 12.8 million sq ft in the same period last year.
"Slower economic growth led to the decline in expansion by companies as cautious sentiments continued since the beginning of the year," the consultant said, while attributing the reasons for decline in absorption number.
During the first six months of 2013 calendar year, C&W said that Mumbai recorded the highest net absorption of 2.4 million sq ft, which however was lower by 10% compared to same period last year.
The absorption of office space fell by 52% in Kolkata to 0.49 million sq ft, 42% in the NCR to 1.42 million sq ft, 22% in Bangalore at 1.8 million sq ft and 21% in Ahmedabad to 0.27 million sq ft.
Hyderabad, too, witnessed 4% drop in absorption.
However, Chennai and Pune were the only two cities to record positive growth in net absorption in H1 2013 compared to same period last year.
Absorption rose by 37% in Pune and 6% in Chennai.
Fresh supply of office space during H1 2013 declined by 3% and was recorded at 17.6 million sq ft. Vacancy rates at the end of Q2 2013 were noted at 19.6%, an increase of 1.7 percentage points over the same period last year.
"The office real estate market has been able to keep afloat in the midst of the negative market sentiments, which include poor GDP growth projections, depreciating value of rupee against dollar, political volatility and continued unrest in the global economic conditions," C&W South Asia Executive Managing Director Sanjay Dutt said.
He noted that the second quarter of 2013 has outperformed both year-on-year as well as quarter-on-quarter, indicating an existing strain of growth that is still visible amongst the corporate world.
"Even though corporate have been cautious in their expansion, the trend has been positive, albeit slow. By the end of the year office space absorption is expected to be at approximately 30 million sq ft with markets such as Bangalore Pune and Mumbai leading the trend," Dutt observed.
