Office space sales fall on IT slowdown: Study

The slowdown in the information technology sector has resulted in reduced demand for office space in India in the second quarter of the current financial year, says a report by global real estate consultancy CB Richard Ellis.

According to the report, many companies, especially in the IT/ IT-enabled Services sectors, have curtailed their expansion plans, which has hit the office space sales in the three-month period. Another dampener was the unavailability of funds for the sector, it says.

The recent financial crisis in the world economies will further impact the growth of office sales as leading companies suffer downturn in their businesses, says the report.

According to CB Richard Ellis, the current global conditions are likely to impact Mumbai the most as it is the financial capital of India, and the rentals and capital values across most micro-markets in the city will see a further correction. The price correction may get severe by mid-2009.

“The global economic slowdown has started to show early signs of impact on the office rental market... Going forward, this is expected to keep office rentals under check,” said Anshuman Magazine, managing director, CB Richard Ellis, South Asia.

During the July-September quarter, a fall in demand combined with the inventory build-up, had started dampening the office space values across Indian cities. In addition, the developers had started offering flexibility in their quoted commercial terms to the companies that reflected the pressure being felt in the market.

According to Magazine, rentals in the National Capital Region will remain stagnant for the next few quarters as the demand for corporate office space is not likely to improve in the next few quarters.