With companies, particularly in the IT and BPO industry, holding back their expansion plans due to slowdown fears, the commercial real estate market posted a lackluster show in the 2nd quarter of 2008.
The June quarter saw office space demand lagging far behind the supply levels of 18.07 million sq. ft. across major cities, as companies turned cautious.
According to Cushman & Wakefield, the demand in the quarter was at 9.74 million sq ft, dominated by absorption (where companies move-in or begin fit-outs) of 6.36 million sq ft, and only 3.38 million sq ft in fresh pre-commitments. “There are certain micro-markets like Noida (NCR), and Rajiv Gandhi Salai (Chennai), which recorded excess supply for this quarter thus increasing the overall vacancy rates,” it said.
The 2nd quarter witnessed stable rental values across micro-markets in the major cities with some central business district (CBD) and off-CBD locations witnessing rental hikes of 3-5 % over the previous quarter. Some peripheral locations in NCR (National Capital Region) and Chennai, however, saw a correction in rentals largely because of excessive supply as well as deferred development plans of various proposed projects.