The economy is facing difficulties on several fronts, including declining GDP growth, high inflation, high fiscal and current account deficits and depreciation of the rupee. The poor performance of the stock market has attracted a lot of negative press in recent months and this was reflected in the commercial real estate market which remained tepid in Q2 2012, says a DTZ research.
Cumulative take-up of grade A offices across India’s seven largest cities dropped by 21% quarter-on-quarter (q-o-q) to 5.9 million sq ft in Q2 2012 – the lowest level since Q1 2010. Bengaluru recorded the highest take-up during the quarter, at 1.8 million sq ft, followed by Delhi NCR at 1.7 million sq ft. Pune and Mumbai witnessed the lowest take-up at 0.33 million sq ft and 0.36 million sq ft respectively.
Cumulative vacancy across the seven key markets declined to 21% at the end of Q2 as demand for space, though lower, continued to offset limited new supply (Figure 1).
Project completions declined by a significant 47% q-o-q in Q2. This was due to rising construction costs on the back of prevailing high inflation combined with a lack of clarity on demand growth in the second half of the year.
Rentals across India’s prime markets were largely unchanged in Q2, except in the ORR micro market of Bengaluru and Kolkata CBD where rents increased marginally due to sustained demand.
There has been a redoubling of efforts to put the economy back on track over the past few weeks.Some concrete measures are expected shortly and this, coupled with any clarity on the European bailout package is likely to put the country’s commercial reale state sector back on the high growth track.
Anshul Jain, CEO, DTZ said, “Fall in H1’12 take-up to the tune of 32% is largely due to the cautious stance adopted by the IT/ITES sector since their order books have taken a hit in the light of current economic slow-down both within India and the Eurozone/US. Bengaluru contributes the maximum to the drop in the take-up in Q2’12. Total take-up for H1 2012 is almost at the half way mark of the annual take-up as forecasted in our latest occupiers’ survey. We hope the economic conditions to improve any time after October this year.”
