Office space demand to grow by 7% in 2014: DTZ

There was general optimism amongst occupiers about increase in growth momentum in near future

Office space absorption is likely to rise 7% this year to 29 million sq ft in India's 7 major cities as corporates look at expanding businesses, says global real estate consultant DTZ.

Absorption was 27 million sq ft last year in the seven cities -- Delhi-NCR, Mumbai, Bengaluru, Chennai, Pune, Hyderabad and Kolkata.

In its report on India office Demand and Trends, DTZ also projected that office rentals would remain stable in most markets in the first half of 2014 and rents would start rising from the second half.

"Most corporates are expected to firm up plans for expansion in the next few months with the overall take-up forecast to grow in 2014, especially in the second half of the year," DTZ said in the report.

"...Economy is projected to grow at a broadly higher rate in 2014 than 2013. This in turn will eventually feed through to generate higher demand for the real estate sector. Consequently, office space take-up is projected to reach 28.9 million sq ft in 2014, a growth of 7% y-oy," it added.

Highlighting the findings of the survey-based report, DTZ India Research Head Rohit Kumar said that 41% of the respondents said they would add office space.

Demand would be led by the IT/ITeS sector (40%) followed by manufacturing and BFSI sectors. Bangalore would continue to be the largest contributor in office space demand.

There was general optimism amongst occupiers about increase in growth momentum in near the future.

"Occupiers expect economic growth to recover following parliamentary elections," the report said.

On rent, the survey said about half of the respondents expect rents to remain stable in the first half of 2014. "But the majority of respondents agree that rents will record a moderate increase over the course of the next 12 months."

Kumar also said that a growing number of occupiers insisted on strict adherence to legal, safety and environment norms of office buildings.

"Consequently, this is likely to have a positive influence on the quality of office building in future," he added.