The commercial real estate sector is currently experiencing headwinds due to a noticeable decrease in office space demand from information technology businesses. Reports from DTZ and Cushman & Wakefield indicate a steady decline in the rate at which IT companies are absorbing office space. This shift has significantly impacted the commercial real estate market. Tracking office space absorption across India's top eight cities, property consultants C&W and DTZ have reported that rates are falling.
Lowered IT demand affects commercial realty sector.
Last year, the total office space absorbed was 29.05 million sq. ft., which reflects a substantial 23% decrease compared to the preceding year. Notably, the IT sector's contribution to this figure was a mere 44%, a stark contrast to the over 64% it contributed previously.
Commercial realty affected by the lower demand from IT companies.
In 2012, IT firms occupied 13.22 million sq. ft., significantly less than the 16.08 million sq. ft. occupied in 2011. This reduction signifies a cautious approach to expansion among many IT establishments, largely influenced by the financial difficulties in Western countries, which constitute approximately 85% of the revenue streams for these Indian IT firms. Rohit Kumar, research head at DTZ India, suggests that any significant upturn in demand from the IT sector is unlikely until the economic situations in European countries improve. The reduced demand has also influenced the supply side, with only 35 million sq. ft. of new office space launched in 2012, a 10% decrease compared to the prior year. Quarter-to-quarter data reveals a steeper decline, with only 7.8 million sq. ft. of commercial space launched in the final quarter of 2012, a 30% decrease compared to the previous quarter.