Companies are renting less office space this quarter, showing a slowdown in economic expansion.
According to the latest report from CBRE, an international real estate consultant, the office space absorbed—a term used for office spaced leased out-- in the first quarter of the calendar year has declined by 37% as against the fourth quarter of calendar year 2011.
The report, by CBRE, an international real estate consultant firm, states that office space leased in the first quarter was 4.1 million sq ft in major cities — National Capital Region (NCR), Mumbai, Bangalore and Chennai — as compared to 6.5 million sq ft in the fourth quarter of 2011. Also, most of the properties leased in the major cities were by international firms and not by domestic ones, the report added.
“There has been a decline in absorption figures when compared to the same time period last year,” said Anshuman Magazine, chairman & MD, CBRE South Asia Pvt. Ltd. “This is a clear indication of global economic slowdown and a decline in India’s GDP growth. This could also mean that there was a reduction in employment in the services industry.”
While the demand for office space has reduced the supply has continued to grow. This has resulted in a downward pressure on the rents. “Most leading office destinations are expected to witness a strong supply pipeline, which might widen the demand-supply gap, thereby impacting rental growth negatively,” the report stated.
Industry experts say rents in Mumbai and NCR have more or less been stagnant since 2008.