Office rentals fall up to 37% across top cities

NEW DELHI: Office space across the top cities in India got even cheaper this quarter as supply far outstripped demand and rentals declined. According to a new Cushman & Wakefield Office report, rentals in NCR saw a significant decline, the worst hit being Gurgaon and the central business district of CP, which saw decline of 19% and 17%, respectively.

Certain areas of Mumbai such as Lower Parel and Worli saw rentals drop by 37% and 29%, respectively, this quarter. Most cities, expect Bangalore, saw double-digit decline in rentals.

The quarter saw a total supply of 11.5 million sq ft of office space across the eight major cities in the country. On the whole, supply outstripped absorption of space by over 45%. The absorption figure stood at 5.78 million sq ft, which is around 30% lower than the same quarter last year. Pre-commitment of space generated in this quarter also saw a decline of 88% over the first quarter of 2008.

���The first quarter of the year has been the weakest so far in terms of commercial office take up across major cities in India as compared to a similar period for the last two to three years. As evident, markets moved towards an over supply situation because of plummeting demand from the key sectors such as BFSI and IT/ITeS,��� says Kaustuv Roy, executive director at Cushman & Wakefield (C&W).

Most IT/ITeS destinations witnessed high vacancy levels in the quarter. Chennai���s peripheral location (Rajiv Gandhi Salai) recorded the highest vacancy of approximately 42% while the city average was at approximately 18%. The lowest vacancy was recorded in Ahmedabad at 5%- 6% due to limited leasing activities and no new supply in the market. Mumbai recorded a vacancy of approximately 11-12% while vacancy levels in NCR stayed at a manageable 8-10%.