Despite the slowing gross domestic product rate, office real estate demand is unlikely to face any major slow down, said Jones Lang Lasalle India, a global real estate consultant in its latest report.
The annual GDP growth of 6.5% in 2011- 2012 released by the Reserve Bank of India resulted in a negative sentiment throughout the real estate industry. Following this, in the first half of 2012 the demand for commercial real estate moderated as the office occupiers remained cautious about their expansion plans.
However, the economy’s service sector has still experienced strong growth rate of 8.5% in 2011- 2012. “This indicates that a major slowdown in office real estate demand is not likely to occur - the service sector generates the highest demand for office space in the country,” said Subash Bhola, Senior Manager - Research at Jones Lang LaSalle India in its report.
The service sector is comprises banking, financial services and insurance (BFSI), information technology (IT), consulting, trade, and communication. Over the years, the service sector has been the growth engine of the Indian economy. Its growth rate has outperformed the overall growth rate of the country’s GDP.
The service sector has also been one of the country’s core sectors, as its contribution to GDP has significantly increased to 63% in 2011-12 from 50% about a decade and half back.
As per the company’s estimates the service sector accounted for about 70% of the demand for commercial office space in the seven major Indian cities in 2011. This cities include Mumbai, Delhi National Capital Region, Bangalore, Chennai, Hyderabad, Pune and Kolkata. Only the remaining 30% of demand for office spaces in these cities came from manufacturing and other industries.
Within the service sector, the IT and BFSI industries contributed the maximum at 35% and 16% demand respectively.
