As negative factors impacting the commercial realty segment fade away, it could well be an indication that the sector is set for renewed growth. If we consider that fewer negative factors implies a positive scenario, then, the commercial real estate sector in the country could well be on the verge of a comeback. It is widely believed that 2010 will be the year, when commercial real estate bounces
According to various reports by global property consultants, the segment had ended 2009 with a 29 per cent decline in space absorption, as compared to the previous year (2008). The total absorption of commercial space across major Indian cities stood at 26.3 million sq ft in 2009, as against 37 million sq ft in 2008. This dip was primarily because of a conservative leasing approach, adopted by the IT/ITeS sector. This sector accounts for a majority of the commercial office space taken up (estimated at 60 per cent), in the country. This year (2010) has been different, wherein the decline has slowed to almost zero and new projects have been announced.
The outlook, for 2010, is positive. The gradual economic recovery has meant that the demand for office space has increased in the second half of 2010, say experts. Across India, about 4.6 million sq ft of pre-commitments for space, due to be absorbed over 2010-2011, have been logged.Industry experts add that Indian corporates had been cautious about their expansion plans, in 2009, because of the recession and also because of falling office space rentals. Most micro-markets across the country witnessed 15-25 per cent decline in rentals in 2009, as compared to 2008. However, in 2010, we are witnessing stabilisation and in some locations, even an upward movement. The last quarter (Q3) has seen rentals stabilising, except in a few locations where there is a perceived oversupply.Though 2009 saw a drop in expected supply, major cities recorded 51.8 million sq ft of new office space supply and it is expected that the figures, in 2010, will be better. With corporates once again beginning to lease large spaces, this new supply is expected to be absorbed, by Q2, 2011. “Clients are starting to talk positive,” says commercial real estate consultant, Prashant Puri. Industry experts see a revival of rentals across all markets in the second half of 2010.
“Corporates, too, are realising this. This is the right time to buy or lease property, as rentals and capital values are still at their lowest,” maintains Puri. On the developer’s side, the positive news is that stalled commercial and office projects are being restarted. “2009 was a tenant’s market. In 2010, things have started to turn around. By all indications, by the end of 2010, commercial real estate should bounce back".
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