Office, retail property demand slips in first half

While supply has been increasing gradually in office space in Ahmedabad, occupancy as well as rentals have been hitting the downhill since couple of quarters.

What's more, since last two quarters, due to an excess supply of office properties, only a handful of new commercial property projects have been launched in Ahmedabad, say developers.

On the retail front, the city has been registering negative growth, say developers. Industry players also cite weakening occupancy rates a cause of worry in the city's office space.

As far as supply is concerned, about million sq ft of office space has been added in Ahmedabad in last two quarters. Even according to a recent report by Cushman and Wakefield, a real estate consulting firm, after a dearth of supply for most part of 2010, Ahmedabad witnessed marginal fresh supply of approximately 100,000 sq ft in the first quarter of 2011 itself.

"Demand has been on the decline, especially in the retail space. Moreover, there is negative supply in retail space with properties being converted into residential projects. The sentiment has been disappointing," said Vijay Shah of M/s Vijay Shah, a city-based real estate development firm.

In terms of rentals as well demand has been low. While earlier rentals were about Rs 40 per sq ft per month, industry experts say there are hardly any takers at Rs 30 per sq ft per month.

"There are now no takers at Rs 30 per sq ft per month rentals. The correction in office and retail space was imminent," said Rajeev Shah, managing director of Ahmedabad-based RBSA Advisory Pvt. Ltd., a valuation, advisory and consulting firm.

Meanwhile, since most of the office space are being purchased by investors, their rental yield has also been decreasing gradually.

According to Shah, there is only 30 per cent occupancy in office space as against 45-50 per cent couple of quarters ago.