Office space absorption rose by 26 per cent to nearly 8 million sq ft during April-June in seven cities on improvement in demand from corporates, according to property consultant CBRE.
Absorption of office space rose to 7.9 million sq ft in April-June from 6.3 million sq ft in January-March period.
Supply increased by 3 per cent to nearly 7 million sq ft in these seven cities -- Delhi-NCR, Kolkata, Chennai, Mumbai, Bangalore, Pune and Hyderabad.
CBRE's report 'India Office Market View Q2, 2014' also said that rental values showed mixed trends.
"The quarter saw an approximately 26 per cent increase in quarter-on-quarter total office space absorption across these prime locations, from a little more than 6 million sq ft in Q1 2014 to nearly 8 million sq ft in Q2 2014 - signalling the generation of reasonable employment opportunities," CBRE said in a statement.
The consultant attributed the rise in absorption to improved transaction activity on increased occupier activity.
Commenting on the report, CBRE South Asia Chairman and Managing Director Anshuman Magazine said: "The formation of a stable central government has generated hope for growth and structural reforms in the country's economy, which is expected to provide the necessary growth for the realty sector."
"Opening up new sectors for investment, while rejuvenating the manufacturing and services sectors, is expected to help in resuscitating demand for corporate office space in the forthcoming quarters," he added.
During April-June quarter, CBRE said, most investment-grade office markets saw an increase in absorption levels, with Bangalore, the Delhi-National Capital Region (NCR) and Pune attracting more than 70 per cent of the total office space requirements of corporate occupiers.
The IT/ITeS, banking/financial services, manufacturing and pharmaceuticals sectors continued to drive demand for Grade A office space in Q2 2014 across the leading cities.
Bangalore led new office space supply in the second quarter. "The IT City, together with Mumbai and Hyderabad, contributed to more than 80 per cent of the total corporate office supply completed across the top seven cities during the quarter under review."
Rental values in the central business districts (CBDs) of most leading cities remained stable during the second quarter, while appreciating by around 5-6 per cent in the core areas of MG Road/Residency Road in Bangalore on high demand.
Rents fell by 2-4 per cent in Mumbai's Nariman Point, Bandra-Kundra Complex BKC, Worli and Prabhadevi, mainly due to weak occupier demand and existing vacancy pressures.
"Going forward, supply backlogs are likely to pressurise rental values across most micro-markets in the short to medium term," CBRE said.
