Net absorption of office space is expected to be about 31 million sq ft this year in the country's seven major cities as sentiments have improved in commercial real estate market, a study has said.
The study was conducted jointly by industry body Assocham and property advisory firm JLL.
With an improvement seen in occupiers' sentiment in the commercial real estate sector, the net absorption of offices spaces in India is expected to be about 31 million square feet by end-2015, Assocham said in a statement.
The supply is estimated at 34 million sq ft during this year.
"A total of about 34 million sq ft of office space is expected to become operational in 2015 and India's office stock is likely to settle at 440 million sq ft by end-2015," the statement said.
Assocham Secretary General DS Rawat said: "With a pro-business government at the Centre, the office sector is expected to see a lot more traction and various multi-national (MNC) occupiers and investors entering the country."
The study highlights there is a window of opportunity for the occupiers and investors as rents and capital values in most of the micro-markets are at their cyclical bottom.
Select micro-markets of cities still offer attractive rents compared to its peak, while several of them have already shown signs of revival due to strengthening demand for office space, it added.
Vacancy rates are likely to be in the range of 15-18 per cent by end-2015, the study points out.
In terms of supply of newly completed office spaces, Delhi and NCR is showing a forecast of 10 million sqft. While Mumbai and Bangalore are expected to inject about six million sq ft and about 8 million sq ft, respectively, of new office spaces.
Against this supply, Delhi and NCR, Mumbai and Bangalore are forecast to record net absorption of 6.1 million sq ft, about seven million sq ft and 7.6 million sqft, respectively.
Mumbai is expected to lead the country in terms of total operational Grade-A office stock of 100 million sqft by the end of this year followed by Bangalore (92.6 million sqft).
The agency further pointed out that larger players with
access to multiple funding sources, such as NBFCs, PE funds and FDI in addition to banks, are likely to have an advantage.
"This could lead to consolidation, which may be in the form of land sales or joint development of land with larger organised and well-funded developers. This will usher in a new phase for the sector which is overcrowded with plenty of players with weak financials," it said.
"We are likely to witness a series of joint developments and joint ventures between landowners and financially weak small developers with bigger, better-funded, better-organised players or weaker developers getting taken over by well-funded larger players, and struggling developers cashing in their land banks by selling them to players with stronger balance sheets and appetite for growth," the report stated.
