Office Space Demand Predicted to Surge in 2013
Increased Demand Anticipated
According to a report by global real estate advisor DTZ, the demand for office space in India is expected to witness substantial growth throughout 2013, possibly reaching approximately 30.5 million sq. ft. This projection suggests a significant improvement compared to the office space demand observed in the preceding year.
Factors Driving Growth
Several factors are anticipated to contribute to this escalated demand for office spaces. The report cites the invigorated trajectory of the global economy following a prior downturn as a primary catalyst. This positive global economic outlook is speculated to substantially enhance office space absorption within the present calendar year. In addition to the effects of globalization, an upswing in foreign direct investment (FDI), specifically within the retail sector, is expected to further bolster the demand for office accommodations in the coming year.
Furthermore, the Reserve Bank of India's (RBI) amendments to its repo rates have fostered an environment conducive to amplified investments. Coupled with the 51% FDI allowance, these revised rates create a positive market sentiment and offer the impression of a more vigorous, resilient economy.
"The fears over the global financial crisis have started fading, resulting in improved market sentiment," noted Anshul Jain, CEO of DTZ India.
Positive Impacts Across the Real Estate Sector
These conducive economic factors are projected to exert a stimulating effect on the real estate sector as a whole, and will specifically invigorate the commercial segment. DTZ India's CEO, Mr. Jain, anticipates the demand for office space will ascend to an estimated 30.5 million sq. ft. in 2013, signifying an approximate year-over-year increase of 12%.
Renewed Expansion Plans and Boosted Demand
Offering an optimistic sign of improvement, numerous companies are reportedly orchestrating plans to expand their office locales. The execution of these plans, several of which had been deferred in 2012 owing to market fluctuations and uncertainties, is expected to further propel the demand for office space. Business expansion is poised to take center stage in influencing office space demand dynamics in the 2014 fiscal year. This will likely result in an uptrend in office space absorption over the course of the current calendar year.
IT Sector Dominance
The Information Technology (IT) sector is particularly expected to increase the demand for office space. The sector is projected to occupy roughly 15 million sq. ft. in the present year in comparison to the approximately 12 million sq. ft it constituted last year, representing a year-over-year growth of about 24%. Mr. Jain further predicts a rise in rental rates within the following 12 to 24 months, thereby further stimulating leasing activity.