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Commercial realty to pick up momentum in 2013

Last updated on: October 24, 2012 02:27 IST

Commercial realty to pick up momentum in 2013

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Dilasha Seth and Nivedita Mookerji in New Delhi

Commercial real estate leasing could bounce back by 20 to 25 per cent in the next calendar year, to touch 36 to 37 million sq ft in absorption.

While the absorption level had been 37 million sq ft in 2011, it fell to 30 million sq ft in 2012 due to a huge slide in demand.

According to analysts and consulting firms, policy announcements such as foreign direct investment in multi-brand retail and the sequential absorption growth in the past couple of quarters point to a revival in 2013.

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Photographs: Arko Datta/Reuters
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According to Anshul Jain, India CEO, DTZ, an international real estate consulting firm, the early signs of a recovery are already visible.

The first quarter of 2012 had recorded 5 million sq ft of absorption, rising to 6 million sq ft in the second quarter and 7 million sq ft in the third, said Jain. He added "the consistent quarter-by-quarter increase is giving us the confidence."

According to Jain, international factors such as the US elections being out of the way, will be positive for the Indian office and commercial space. Also, the European nervousness is expected to settle by the end of this year.

"The policy announcements by the Indian government such as allowing retail FDI would also contribute towards making 2013 a good year," he said.

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Photographs: Reuters
Tags: Anshul Jain , DTZ , FDI , CEO

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Commercial realty to pick up momentum in 2013

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Given the state of economic fundamentals so far, the office space take-up seems subdued, said Samantak Das, national head (research) at Knight Frank.

"However, I am a little optimistic for 2013-14. As the global economy recovers and reforms in the country consolidate, office space demand will pick up," he said.

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Photographs: Reuters

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Commercial realty to pick up momentum in 2013

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Real estate consulting firm Cushman and Wakefield is a bit conservative on the growth figure for next year. Office space demand is expected to witness a growth of 10 per cent in 2013 and 20 per cent in 2014, said Sanjay Dutt, executive managing director (south Asia).

This is, however, likely to come down over the next two years (2015-16), drawing from the forecasts that predict a slowdown in the global GDP, said Dutt.

More and more companies are looking at rationalising their real estate portfolio by relocating and/or consolidating their wide-spread operations.

"This is expected to lead to an increase in leasing activities and also add to the net absorption," said Dutt.

Cushman & Wakefield estimates commercial office space demand of 180 million sq ft in the next five years in the top eight cities of the country.

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Knight Frank's Das said since demand in cities such as Bengaluru and Pune was driven by Information Technology/IT enabled Services (ITeS), and 70 per cent of the IT/ITeS industry was dependent on the global economy, the office space absorption was expected to surge in the next fiscal.

He said there was an oversupply in most major cities, which was expected to get absorbed next financial year.

According to Jain of DTZ, the banking and financial sector, which has been quiet, may see some demand next year. Other than that, IT/ITeS and fast moving consumer goods are expected to perform.

Demand at special economic zones, however, is likely to fall in the next two years, said Jain. Sachin Sandhir, managing director of Royal Institute of Chartered Surveyors, said that the industry sentiment has improved and the gloom has gone.


Photographs: Arko Datta/Reuters

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