Track2Realty-C&W: NCR registered absorption of 1.2 msf in Q3, 2012 and which was 14% lower when compared to the previous quarter due to cautious approach by the companies. IT/ITeS and consulting firms continue to be among the largest occupiers taking up spaces in excess of 200,000 sf each across Gurgaon and Noida, says office market report from real estate consultancy Cushman & Wakefield.
With the steady absorption levels resulted in dip in overall vacancy compared to the previous quarter and was recorded at 20.81% at the end of 3Q 2012. However, rents across most micro markets remain unchanged during the quarter
The city witnessed approximately 450,000 sf of office space was pre-committed during the 3Q 2012. The absorption decline resulted in dip in overall vacancy compared to the previous quarter and was recorded at 20.81% at the end of 3Q 2012.
Mumbai witnessed the highest absorption across all other cities across India in office absorption. in Q3 2012 recorded at 2.23 million sq. ft. (msf). It saw an increase of 50% over the previous quarter. Chennai recorded the second highest absorption of 1.32 msf followed by Bangalore at 1.25 msf and NCR at 1.2 msf.
The total absorption for office space across major cities was recorded at 7.8 msf which was marginally higher than previous quarter. However the absorption levels in till date (three quarters) in 2012 saw a decline of 14% over the same period last year.
Mumbai along with Chennai, Bengaluru and Pune saw increase in absorption levels compared to last quarter where as NCR, Hyderabad, Kolkata and Ahmedabad witnessed a slowdown.
Supply of office spaces in Q3 2012 was recorded at 11 msf demonstrating an increase of 13% over previous quarter. Mumbai recorded the highest supply of approximately 5.35 msf followed by Bangalore that saw infusion of 1.66 msf of fresh office supply. Chennai also recorded a significant increase in supply over the previous quarter which was recorded at 1.2 msf.
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OFFICE MARKET DATA |
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| City | SUPPLY (MSF) | ABSORPTION (MSF) | VACANCY | ||||
| Q1 12 | Q2 12 | Q3 12 | Q1 12 | Q2 12 | Q3 12 | Q3 12 | |
| Ahmedabad | 0.90 | 0.50 | 0.33 | 0.11 | 0.33 | 0.32 | 10% |
| Bengaluru | 1.16 | 3.02 | 1.60 | 1.64 | 1.06 | 1.25 | 15% |
| Chennai | 0.36 | 0.34 | 1.20 | 0.74 | 0.98 | 1.32 | 15% |
| Hyderabad | 0.56 | 1.51 | 0.62 | 0.72 | 0.99 | 0.50 | 16% |
| Kolkata | 0.60 | 0.97 | 0.00 | 0.28 | 0.76 | 0.13 | 15% |
| Mumbai | 1.20 | 2.46 | 5.35 | 1.30 | 1.48 | 2.23 | 20% |
| NCR | 2.00 | 0.91 | 0.58 | 0.90 | 1.40 | 1.20 | 21% |
| Pune | 0.55 | 0.11 | 1.48 | 0.78 | 0.61 | 0.84 | 20% |
| TOTAL | 7.33 | 9.8 | 11.16 | 6.47 | 7.61 | 7.78 | |
Source: Cushman & Wakefield Research
Sanjay Dutt, Executive Managing Director, South Asia, C&W India said, “India’s office market conditions are favourable for corporate world at this time when there is a sizable availability of ready or near ready supply. Also double digit vacancy numbers is helping in keeping prices at stable levels. Indian office market is expected to remain stable in short to medium term and we hope to see stable absorptions in the range of 28-30 million for 2012 by the end of the year. Even while IT/ ITeS remain the largest in terms of volume of office space demand, the real drivers will be the sectors of BFSI, Telecom, consulting etc. that will keep the momentum upbeat in the next few months.”
Sanjay continued, “Strategic asset purchases by Indian and multinational companies are on the rise as Indian office space are attractive investment options at current values. Purchases are limited to strategic assets with potential good rental returns and return on investment in medium to long term period. Since internal cost of borrowing capital is significantly lower than from the market, investments in real estate are being considered as a viable option.”
Bangalore
Bangalore registered a drop in office uptake in the first three quarters of 2012 over the same period last year. The total absorption recorded till date (third quarter) in 2012 was 3.95 msf which was a drop of 54% over same period last year. In the third quarter of 2012 the absorption was recorded at 1.25 msf registering an improvement of 18% over the previous quarter. Traditionally a high absorption market, Bangalore has been overtaken by Mumbai as the city with the highest office absorption for the last two quarters.
Supply on the other hand saw an increase of over 2 times over the first 9 months of 2012 over the same time previous year. In the third quarter, however, the city saw a reduction in supply by 47% compared to previous quarter noted at 1.6 msf, due to the delay in completion of projects. The slowdown in absorption has led to an increase of 2% in vacancy which was recorded at 15% in Q3 2012.
Rental values remained unchanged in Q3 2012 over previous quarter but with a downward bias and going forward. A few micro markets could experience minor corrections owing to a large quantum of supply that is expected in the Q4 2012.
Chennai
Chennai witnessed highest absorption of 1.32 million sf in 3Q 2012 among South cities followed by Bangalore (1.25 msf) and Hyderabad (.50 msf). Chennai’s office market also saw improved absorption activities with an increase of 35% in total absorption in Q3 2012 over the previous quarter. It was also the most active office market in the southern region marginally surpassing Bangalore in terms of office absorption. Majority of office space was absorbed in the markets of Taramani, GST Road and peripheral Rajiv Gandhi Salai.
Supply also saw a corresponding increase of 54% over previous quarter, with approximately 1.2 msf of fresh office space entering into the market in Q3 2012. Buoyant activities in the market was instrumental in bringing the vacancy levels down by 1% to 15% in this quarter while rental values across micro markets and grades remained stable in Q3 2012. However with exception of a few locations such as T.Nagar, Alwarpet and Guindy that saw marginal appreciation due to increased demand and is expected to continue witnessing slight increase in rental values during the last quarter.
Hyderabad
Hyderabad saw a drop in absorption by nearly 50% recording a very meagre 520,00 sf of office space being absorbed in Q3 2012. This was largely due to a slowdown in global economic conditions that is affecting the uptake of space in the city. Driven largely by the IT/ITeS sector, Hyderabad is feeling the impact of rationalisation of space and an overall cautious approach that most of the demand driving sectors is taking.
The supply side complied to changing scenario and thus the total new supply for Q3 2012 also remained subdued at 620,000 sf recording a drop of 31% in fresh supply over the previous quarter. The impact of a restrained office market activity were witnessed in the vacancy levels that remained unchanged over the previous year while rental values also remained stable in the same period.
Mumbai:
Mumbai absorption, led by the BFSI sector accounted for approximately 30% of the total space uptake in the quarter. With many financial institutions undertaking consolidation across the city, major players were seen taking up large, contiguous spaces across the city. The highest absorption was recorded in the micro markets of Bandra- Kurla Complex and Lower Parel on account of availability ready for possession or near completion office spaces. The trend clearly tipped towards completed or near completion projects which give the corporate the ability to start operations early.
With a total supply of 5.35 msf, the city witnessed 117% increase over last quarter and 4.15 msf of the supply in this quarter was concentrated in BKC, Lower Parel and western suburban locations of Goregaon and Borivali. The vacancy rate has increased from 17% in the previous quarters to 20% in Q3, 2012. With vacancy of approximately 20% across the city, values have remained under pressure with some micro markets even recording a marginal decline. Prominently the location of Andheri Kurla recorded a decline of approximately 11% in rental values over previous quarter due to high vacancy of over 25% in Grade A supply. CBD district comprising of Nariman Point also saw a marginal 4%
Pune:
Pune saw a total absorption of 840,000 sf which was 38% higher than the previous year. The total absorption for 2012 YTD now stands at 2.23 msf higher by 6% over same time last year. Fresh supply for Pune was recorded at 1.48 msf in Q3 2012. Rentals have been largely stable across micro markets with only minor movements. Some of the fresh Grade A supply that was released in the CBD and Off-CBD is being offered at the upper end of the rental bands prevailing in these micro markets.
Ahmedabad:
The market saw stable absorption which was recorded at 320,000 sf almost at the same level as the previous quarter. Limited supply and attractive pricing helped the market maintain its vacancy levels at 10% , same as the previous quarter.
Kolkata
With no new supply and very little absorption in Q3 2012, office activities Kolkata remained subdued. Values and vacancy both remained stable over the previous quarter. Vacancy levels have seen a drastic drop from 28% in Jan – Mar 2012 (Q1 2012) to 15% in this quarter owing to the restrain that developers have adopted in the last few quarters thereby restricting office space supply ensuring that values for the existing stock and for future supply is maintained at reasonable levels.
