Office spaces rented by companies, a clear indication of the economy's health, for 2012 dipped by 26% compared to 2011 in seven major cities, according to a report by leading commercial property and real estate services adviser, CBRE India.

According to the report, about 26 million sq ft of office space was absorbed in 2012 as against 35 million in 2011. "The decline in absorption across key cities is primarily due to the continuing global and domestic uncertainty in the economy which is a deterrent for corporates in their expansion plans. For the demand to revive, the economic reforms in India need to be fast tracked besides global economy has to show some improvement in growth," said Anshuman Magazine, chairman and managing director, CBRE (South Asia).

Real estate developers have witnessed a bad phase in the commercial real estate space since 2008. While the residential real estate saw a rise in demand between 2008 and 2010 followed by a price rise, commercial real estate continued to witness pressure on rents. As a result many developers have converted their commercial real estate projects to residential ones especially in Tier I cities.

While the demand remained slow for the office space, the supply has reduced only marginally, creating further pressure on rental yields. "The total office space supply that entered the market in 2012 was about 31 million sq ft, compared to about 30 million sq ft  in 2011," the report said.

The seven cities surveyed were National Capital Region, Mumbai, Bangalore, Chennai, Hyderabad, Pune and Kolkata.