Commercial Real Estate Sector Slows Down Amidst Economic Downturn
The commercial real estate segment in India is feeling the pinch of the broader economic slowdown. This is apparent in the decreased absorption rates witnessed during the second quarter (April-June) of this year.
A report from commercial real estate services company Cushman & Wakefield (C&W) highlights the demand-supply disparity during this timeframe. While the demand stood at 9.74 million square feet, the supply surged ahead, reaching 18.07 million square feet.
"There has been a slowdown in the real transactions, observed in the period 2008 due to a number of factors, primary amongst which is a general slowdown of the economy,” Cushman & Wakefield Director Kaustuv Roy said.
The IT/ITeS sector—a major commercial real estate occupier—has put expansion plans on hold, contributing significantly to the reduced uptake observed. Cushman & Wakefield Director Kaustuv Roy noted that this postponement of expansion by these major players contributes to the slowdown.
C&W also observes that most corporations—both domestic and multinational—adopted a cautious approach during the majority of the period. Roy expanded on this observation, confirming that businesses followed a wait-and-watch strategy.
Rental Value Fluctuations
Despite the sector's slowdown, the April-June quarter saw rent increases in primary micro-markets of major cities. Rental values climbed between 3% and 5% compared to the preceding quarter.
However, the report notes certain peripheral locations in the National Capital Region (NCR) and Chennai saw corrections in rental prices. This can be largely attributed to the overabundance of available space, as well as deferments in previously proposed project developments.