Data provided by DTZ and Cushman & Wakefield show that there has been a steady decline in the rate of office space absorption by IT firms. This has affected the commercial realty, the report added.
Lowered IT demand affects commercial realty sector.
Commercial realty sector is hit by lowered office space absorption by IT companies. Tracking the office space absorption in top eight cities of India, property consultants C&W and DTZ have reported that the rate of office space absorption has been falling in top cities of India.
Last year, 29.05 million sq. ft. of office space was absorbed. This figure shows a 23% decline in the rate of office space absorption compared to the previous year.
The contribution of the IT sector was a mere 44% last year. On the other hand the information technology sector had contributed over 64% of total office space absorption. This slowdown of IT segment affects commercial realty sector adversely. Continue reading →
As the phase of recession is towards its end, an increase in demand of commercial real estate projects, including both office and retail space has been witnessed by firms and retailers.
The executive director for development services at consultants Cushman and Wakefield India, Ravi Ahuja said that in many cities including Mumbai and Delhi-National Capital Region (NCR), the commercial space leased out or sold by the firms is about 9.2 million sq. ft within just a time span of three months, while the space leased and sold during April-June 2009 was just 5.8 million sq. ft.
Last year, the retail space available was 6.3 million sq. ft. However, this year, some 16.4 million sq. ft of retail space is expected to be available. Consultant Jones Lang LaSalle Inc. has predicted 8.9 million sq. ft will be absorbed this year, compared with 4 million sq. ft in 2009.
Developer such as Assotech Ltd, Wave Inc. Anant Raj Industries Ltd and BPTP India Ltd and have also reported improving property demand.
Due to the continuous oversupply of the commercial projects, the signs of pickup in demand in the sector seems becoming dull and thus banks are also backing out from lending to real estate firms.
As compared to the residential sector, the demand growth of the commercial sector in past few months is much behind that of the residential one. Not only the office spaces are yet to be occupied, but also the ready projects are unable to seek buyers. This lack of buyer’s interest in the office spaces, multiplexes and retail has forced banks to back off lending to commercial sector.
Other than the uncertain demand scenario for commercial space, banks also have to look and take care of the rising realty sector debt on their ledgers. Ranjan Dhawan, the chief general manager of Punjab National Bank (PNB) said that since some of the banks have reached their sectoral exposure limit, they cannot now get into more lending. He also added that although PNB is still in is exposure limit, still it would get into some other lending only after thorough due-diligence.
As per some senior executive of JLLM, Jones Lang LaSalle Meghraj, integrated commercial space developments is following the steps of integrated residential complexes and is thus expanding in India.
Mr. Anuj Puri, th Country Head of JLLM said that this is an upcoming trend as well as a saleable one.
Such projects house office space, five-star hotels and retail area among other facilities.
The project in Bangalore from Brigade Group is an example of such projects while there are many more such projects queued up.
As per the expectation of Puri, the margin builders have kept in these projects is higher than that in other projects.
Other examples of such projects are Capital City by BPTP Ltd in Noida which is spread across 21.17 acres and comprises 2.1 million sq ft of office space, Nirmal Galaxy by Nirmal Lifestyle at Mulund in suburban Mumbai.
One of the builders said that there is no doubt in the success of such projects since their housing counterparts are already a success.