Indian cities with good demand for office office
Mumbai, NCR, Bangalore and Hyderabad led the country in space absorption.
On the other hand, 55 million square feet of office space came into the market in these seven cities during the period. "It is estimated that another 55-60 million square feet is lined up for completion in the next two years. More than 60% of the upcoming supply is concentrated in the three big markets of NCR, Mumbai and Bangalore. Of this, almost 70% is IT-dominated like IT parks and SEZs," it said.
In Mumbai, the report said transaction activity and absorption levels are expected to improve this year as well. "Rental values should firm up in central locations. However, it might face some vacancy pressure in the suburbs," it said. Grade A offices in Bandra-Kurla Complex, Lower Parel and Worli are in demand, indicating a move towards the alternate and extended business districts.
However, the report said vacancy levels increased in suburbs such as Thane and Navi Mumbai. "Vacancy levels increased in suburban destinations led by Gurgaon, Noida, GST Road, Ambattur, Thane and Navi Mumbai, among others, due to a huge supply pipeline," it said.
Rental values also shot up steadily in the central building districts (CBDs) in 2010, banking on resurgent demand and declining vacancy levels amidst negligible supply additions. "Demand for quality CBD space continues to rise in major cities like Delhi and Mumbai, which is escalating developer expectations. However, absence of adequate levels of grade A space in CBD is also making some occupiers move towards suburban locations, resulting in rental stagnation in the fourth quarter,'' it said.
Anshuman Magazine, MD of C B Richards Ellis, said, "Last year saw a resurgence in the demand for office space, which was fuelled by business expansion of corporate India in the backdrop of economic recovery." New economy sectors like telecommunications, pharmaceuticals, FMCG, besides banking and financial services led the overall demand for office space. We believe the Indian office market will continue to see increased transaction volumes, consequently leading to higher absorption level in the medium term."