Vacancy levels in commercial real estate set to grow in Ahmedabad

While vacancy levels in commercial establishments are set to grow from current 8%, that for malls is being reported at 30%

While vacancy levels in commercial establishments are set to grow from current 8%, that for malls is at 30% despite an uptake in leasing activity led by IT, BFSI and consulting sector in Ahmedabad real estate market, a new report says.

According to a report by CIRIL Network, an owner-operated network of real estate consultants companies in India, that tracked 8 major markets and trends between April and June 2015, revealed that in Ahmedabad, the office space market has witnessed total absorption of around 0.75 million sq ft in the year 2015 with majority of the leasing activity around 60% being concentrated on S G Highway.

While the IT & ITeS sector continued to dominate the leasing activity with 35% share, it was followed by BFSI at 25% and consulting sector at 20%, the CIRIL report stated.

The report adds that the rentals across Ahmedabad's key submarkets grew between 5-10% in 2015. However, with 1.5 million square feet (msf) of supply set to become operational in first quarter of 2016, vacancy levels may rise from the current 8%.

As per CIRIL, overall mall vacancy was high at 30%, with banks, apparels and lifestyle brands expanding footprint in prominent main-streets such as C G Road, Satellite Road and Prahladnagar.

In the industrial and warehousing space, Sanand, Bavla and Changodar along NH 8A emerged as hubs. Increased demand from the manufacturing sector led to industrial shed rentals increasing by 10-15% in Sanand and Changodar on a year-on-year basis.

Quoting the latest introductions in the Indian economy, like 'Housing for All' and 'Smart Cities', Pawan Agarwal, chairman, CIRIL stated that a sustained demand could prevail in near future in the real estate sector. One of the key drivers of economic growth, this sector contributes 5-6% to India's GDP and will incur more non-resident Indian (NRI) investments in 2016.

"India ranked as the numero uno investment destination in the world as per the 2O15 Baseline Profitability Index (BPI) of World Bank. Ease of doing business in India improved to 130 in 2015 from 134 in 2014. No wonder, it has seen a revival of interest from private equity investors in real estate with highest investment in the last eight years recorded at approximately $2.8 billion," Agarwal added.