H1 office space absorption up 16pc in top eight cities

Office space absorption rose by 16 per cent during the first six months of this year at 13.4 million sq ft in eight major cities as corporates are looking to expand on improved market sentiments, according to property consultant Cushman & Wakefield.
However, office space supply declined by 7 per cent during January-June 2014 in Delhi-NCR, Mumbai, Kolkata, Chennai, Bangalore, Pune, Hyderabad and Ahmedabad as compared with the year-ago period.
"Total net office space absorption recorded a 16 per cent increase across the top eight cities in the first half of 2014 (January-June) compared to the same period last year. The total net absorption for H1 2014 was recorded at 13.4 million sq ft," C&W said in a statement.

Office leasing stood at 11.54 million sq ft in the first half of 2013.
The top three performing cities during H1 2014 were Bangalore, Delhi-NCR and Hyderabad, representing 57 per cent of the total net absorption.
All cities except Kolkata, Mumbai and Pune recorded a year-on-year (Y-o-Y) increase in net absorption, it added.

Net absorption in Mumbai was lower by 22 per cent in H1 2014 as compared to same period last year, while Kolkata and Pune saw a dip of 36 per cent and 17 per cent, respectively, during the period under review.
Office space leasing grew maximum in Ahmedabad (172 per cent) and Chennai (115 per cent) where net absorption jumped more than two times compared to H1 2013.

Net absorption in Hyderabad was 2.3 million sq ft during H1 2014 compared to 1.9 million sq ft recorded in Mumbai.
Vacancy level stood at 22 per cent in H1 2014.
Commenting on the report, C&W Executive Managing Director, South Asia Sanjay Dutt said: "The office markets have reacted positively to the outcome of the general elections that has encouraged corporate to view the markets positively".
Office absorption has increased in the first half of the year and is expected to be higher in the second half of the year as well, he added.
"The recent announcement in the Union Budget proposes for a reduction in the FDI investment from USD 10 million to USD 5 million which will help to boost investments especially in Tier 1 cities like Mumbai where value of the properties attract PE despite their size," Dutt said.

Tier 2-3 cities would also see increased activity due to attractive valuations.
Dutt noted that tax incentives on Real estate Investment Trust (REIT) would have a positive impact and the instrument is expected to play a crucial role in bringing in investments and provide exit route for investors in due course.