Is there a recovery in sight for sagging office spaces hit by the ripple effects of the US financial meltdown? Market analysts say office spaces have started generating buyer interest from corporates, making developers optimistic about the segment.
But industry experts add a note of caution, saying the supply-demand gap is still huge.
“There is a bit more enquiry for office spaces than a few quarters ago, which is a positive sign. However, the deals are not happening at a good pace and there is at least 18-24 months of oversupply in the market,” Sameer Nayar, managing director and head of real estate finance at the Asia Pacific unit of global financial services firm Credit Suisse told Hindustan Times.
Property consultant Jones Lang LaSalle Meghraj said demand is picking up in cities like Mumbai, Bangalore and Delhi driven, not by traditionally strong IT buyers –which have been hit by the downturn in Western economies – but those from other sectors.
“Leasing enquiries have started to show a gradual increase. As the pace of recovery in the global environment improves further, these enquiries are expected to be converted into pre-leases,” DLF mentioned in a presentation made to analysts last week.
“Unlike September-October when demand had hit its bottom, we are receiving enquiries from corporates now,” said Anil Kumar, chief executive officer of Delhi-based Ansal API.
Industry estimates suggest rentals declined between 25-40 per cent from their peak values a year ago. Analysts said rentals continued to remain lower than last year whereas developers insist rentals have started moving upwards.
“Lower rentals are a thing of the past, in Connaught Place rentals are anywhere between Rs 150-Rs 300 per square ft whereas a quarter ago it was at Rs 100-Rs 250 per sq ft,” said Pradeep Jain, chairman, Delhi-based Parsvnath Developers.
“Rentals are down significantly from last year and are nowhere close to moving up,” Nayar said.