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Office space supply down by 50% in first half of 2017: report

LiveMint logoLiveMint 18-07-2017 Bidya Sapam

Mumbai: Supply of premium office space across eight major cities has fallen by 50% in the first half of this year as compared to the same period last year, with all markets experiencing a slowdown, according to a half-yearly report by property consultant firm Cushman & Wakefield.

This is one of the biggest fall in the last five years. In the first six months of this year, total supply stood at approximately 10 million sq.ft, as the per the report.

Shortage of grade A office space across cities, including Mumbai, Bengaluru, Delhi-National Capital Region (NCR) and Pune, has also led to net absorption declining by around 11% in the first six months of this year, the report said.

“Supply has been gradually declining in the last five years. Besides the cyclical nature of the market, construction during the first three months also slowed down due to demonetization though it picked up in the second quarter,” said Siddhart Goel, senior director (research services) India, Cushman & Wakefield.

According to the report, lack of supply has been a critical reason for the slowdown in the uptake of space in the first half of this year. Shortage of supply is also likely to push rental values by around 4-5% across cities. However, rents in Hyderabad are expected to rise by as much a 25% through 2019 due to robust demand, it said.

“Limited available of quality supply has encouraged occupiers to pre-commit office spaces resulting in a significant increase in about three times in such activity primarily driven by Information Technology- Business Process Manager (IT-BPM) and health care sectors in Hyderabad, Gurgaon and Bengaluru,” said Anshul Jain, managing director India, Cushman & Wakefield.

He said both supply and demand is likely to pick up in the second half of this year as “dust settles on the geo-political and economic upheavals across the world”.

“We are expected to see a healthy net absorption of close to 32-35 million sq.ft by the end of year. Further with a pre-commitments of close to 6 million sq.ft, we can expect the momentum of absorption to continue,” Jain said.

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