There are 2 sides to Indian real estate story – While the residential property market is seeing a surge ( in some cases at record rates), on the other hand, commercial property market (office spaces) are still reeling under pressure.
Due to recessionary environment in last 18 – 24 months, the industry saw a huge shift in operations among the developers with interest in the commercial property market towards affordable housing projects as the income levels population at the base of the pyramid investors witnessed a contraction on account of a slowdown.
However, this much-needed shift was not to be before there was an actual supply over-hang in the commercial real estate markets globally.
This was evident from the fact that despite global economy showing signs of growth and recovery, office markets around the world recorded another six-month period of relative weakness, according to a report pertaining to global office real-estate review by Colliers International.
Mumbai Office Space Rental Trend
The report says that about 14.5% commercial office space in Mumbai is still lying vacant. No new project was launched in 4Q-2009. That apart, the office markets in Mumbai will some more new supply in the first half of 2010 in prime areas such as Andheri, Lower Parel, BKC and Thane.
Delhi Office Space Rental Trend
About 19.5% of office real-estate still lay vacant in Delhi. Only a few new projects were launched in New Delhi during 4Q-2009. However, new projects were launched in the adjoining cities such as Gurgaon and Noida – Reason – prior to Commonwealth Games later this year, incremental demand for office space is anticipated over medium term.
Chennai Office Space Rental Trend
The office space report further says that Chennai recorded a highest vacancy rate of about 22.5% in the Asia-Pacific region. Even Bengaluru, which usually witnesses demand for office space for IT/ITES industry, witnessed a vacancy rate of 19%.
Till December 2009, Moscow, Guangzhou and Dubai are among the global list of cities which lead the pack of locations having maximum under-construction office space at 43.5 million sq ft, 34.7 million sq ft and 24 million sq ft respectively.
Chennai is the only Indian city to feature in the list of top 50 cities with maximum under-construction office spaces at around 2.1 million sq ft.
The supply cycle in 2010 continue to be challenging for the rental performance of individual centers with relatively weaker demand fundamentals. The leasing market has taken a substantial hit on account of the global slowdown and the over hang of new supply created during that period.
The over-supply may increase in 2010 if the insufficient demand dynamics plays out itself, even in the face of current recovery. This over supply in the short term has the potential to act as a dampener on growth in rental levels even with recent wave of optimism around the globe.
source: Full Report