Net absorption of office space declined by 23% in 2012: Cushman & Wakefield

The annual yearend report by global real estate consultants, Cushman & Wakefield recorded a 23% decline in the total net absorption across top eight cities (NCR, Mumbai, Bengaluru, Chennai, Hyderabad, Pune, Kolkata and Ahmedabad) over 2011.

The total net absorption for 2012 was recorded at 29.05 million square feet (msf). There was a corresponding decline in the total supply in the same period which was at reduced by 10% over the last year and was noted at 35.30 msf.

Vacancy across the office market declined 2012 over the previous year and was noted at 17% at the end of 2012. Bengaluru, a traditionally high absorption market recorded a decline of approximately 24% over last year. Almost all locations which are driven by the IT/ ITeS and related industries recorded a slowdown in absorption.

The cautious approach by global and Indian companies, in view of a slower economic growth led to a decline in absorption levels. Majority, companies putting on hold or revisiting their expansion plans to commit to lesser than expected office space in the year. Chennai saw the highest decline year on year in absorption which dipped by a significant 51% over previous year.

Despite the slowdown in absorption, cities such as Bengaluru, Chennai and Pune noted marginal decline in vacancy levels in 2012 compared to last year due to converging gap in new supply and absorption levels. Bengaluru noted the highest net absorption of approximately 7.29 msf followed by Mumbai that saw 6.26 msf of net absorption for the year.

Leasing activity (Net absorption) declined in all cities except Ahmedabad and Mumbai that saw a notable increase of 38% and 9% respectively over the last year. The year saw pre-commitments of 6.94 msf, majority (46%) of which is recorded in Bengaluru followed by Hyderabad (22%) and Mumbai (15%). In all cities except Mumbai and NCR, most pre-commitments are noted in IT/ITSEZ developments.