Impact of Weak Office Space Demand on Air Cooling Manufacturers
The downturn in office space demand not only affects developers, but also significantly impacts air conditioning manufacturing companies. Therefore, an upswing in office space demand can be expected to provide the necessary boost to A/C manufacturers.
Correlation Between Office Space and A/C Sales
There is a direct link between the increase in office space demand and the improvement in sales for air cooling manufacturers. Recent industry reports suggest that major players in the air conditioning sector, such as Blue Star India, have been adversely affected by the sluggishness in office space absorption.
Commercial Projects Drive Demand
Top A/C manufacturers typically secure contracts for centralized cooling systems primarily from commercial projects. Consequently, any slowdown observed within the commercial sector directly impacts these firms.
Major share of A/C firms are from centralized shopping malls, that holds lion share of office space demand.
Sluggish Previous Year, Hopes for Improvement
Last year proved challenging for both the commercial real estate sector and A/C manufacturing firms. However, forecasts suggest better performance.The current year has demonstrated indications of advancement in office space demand, which, in turn, may boost the commercial sector. This has instilled renewed optimism among A/C manufacturing firms. A recent commercial survey states positive signs for economic growth this year.
Financial Impact and Future Expectations
Blue Star India, for instance, reported a loss of Rs.104 Cr in the previous year due to a languid commercial real estate market. The company anticipates improved turnover this year, buoyed by signs of recovery within the sector.
Projected Growth in Commercial Space Demand
According to a report by Cushman & Wakefield, commercial space demand in India is expected to rise to over 160 million square feet by 2014. The report highlights that major cities such as Bangalore, Delhi-NCR, and Mumbai are likely to account for a significant share of this increase.
Housing sector demands A/Cs. Sales of air conditioner improves well with the rise of office space demand.
Impact of IT and ITeS Sectors
The primary reason for the decline in office space demand last year was weakness in the IT and ITeS sectors. A report from DTZ India and Cushman & Wakefield indicated that this decline amounted to approximately 23 percent.
Market Stability and Outlook
The RICS India Commercial Property survey indicated a stable demand during the past year's third quarter. Additionally, the survey noted that India improved its ranking from nineteenth to ninth position between the third and fourth quarters.
This indicates an increasing demand for office space in India, giving rise to improved prospects for A/C firms and other industries linked to the commercial sector.