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The present Indian economic scenario is finally showing a northward movement for the demand in the commercial real estate sector.  Consecutively, the higher demand for the office space will also influence the sale in the residential real estate sector too. According to a market research, the first quarter of 2011 experienced a 20% increase (almost 6 million sq ft) in the demand for office market all over every potential real estate sectors in the country in comparison to the same duration last year. Almost around 27% of the total office space was absorbed in the National Capital Region of Delhi.
Market analysts opine that the Indian office market will carry on this growth graph in the coming years. With corporates reworking and introducing their expansion strategies nearly in all industry sectors, requirement levels and transaction rate are anticipated to continue the upbeat in the near to midterm. Although with momentous supply in the market, rentals are likely to stay under pressure except for Grade A office spaces in certain main micro-markets.
In spite of escalation in demand of office space, the rentals have not been raised as the market is viewing a good supply of quality office space in the area. This is actually a good news for the end user who is seeking for office space. The report further explains that as the demand levels have seen a rise but due to the high supply pipeline and ready availability of quality office space the prices have not experienced any undue increase. In a few micro-markets, elevated vacancy levels can lead to the development of some downhill pressure on values in the short to medium term. However, the values in the Central Business District (CBD) locations in cities like Delhi, Pune, Kolkata and Hyderabad continued to be constant where as cities like Bangalore and Chennai experienced development. The report also states that the office market in the country is likely to go on with the growth process with new opportunities coming in due to corporate expansion strategies.
The CBD of Connaught Place and surrounding locations in Delhi experienced improved attention from potential tenants in the first quarter of 2011. As compared to the earlier few quarters, there was no supply to the CBD in the first quarter. Analyzing the general shortage of new supply, a few Grade B buildings have started renovation plans in order to improve their amenities and get more tenants.
Gurgaon experienced an addition of around 0.85 million sq ft of new IT office space and about 0.47 million sq ft of non-IT office space. Transaction going ons kept on the higher side as compared to the other micro-markets with absorption confirmed at around 0.75 million sq ft in IT/ITeS and another 0.12 million sq ft in the non-IT sectors. Higher transaction activity and increasing tenant attention on SEZ developments paved way for the hike in the rental values by almost 7-8 %.
On the other hand Noida witnessed a lower office space leasing activity as compared to the previous quarter. A rising tenant focus in SEZ developments along the Noida-Greater Noida expressway is expected to enhance the transaction activity in the near term.
In Mumbai it is the Bandra Kurla Complex or BKC which is currently the “hotspot” for most corporates, MNCs and banks as compared to the rival commercial business districts of Lower Parel and Nariman Point-in the latter, lease rentals are currently between Rs 225 and Rs 250 a sq ft on an average. “Nariman Point buildings can only offer offices ranging between 500 sq ft and 3,000 sq ft but clients who want a floor space in excess of one lakh sq ft find it readily available in BKC,” they said.
In Mumbai Experts said that a decade ago. “Developers preferred to construct residential apartments due to quick sales at the under-construction stage. Eight of out of 10 files submitted to the BMC for approval were residential. But with growing businesses, there is going to be a demand for quality commercial premises in the Central Business areas,” they said.
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