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The global economic slowdown is pushing corporates to postpone their
expansion plans, which is bad news for the office space leasing segment in
India.
Even though construction activity is expected to continue at a fast
pace which would mean 19% higher completions in 2012 compared to the year
before, take up of space is expected to remain subdued during the year, says a
new Jones Land LaSalle report called Indian Realty - Through the Looking Glass.
We expect 32 million sq ft of office space to be absorbed in 2012,
registering a decline of 12.5% over 2011," says the report.
The year 2011 saw record completion of office space projects as well as
take up of space. About 37 million sq ft of space was absorbed in 2011, higher
than the previous peak of 33 million sq ft achieved in 2008.
Major Indian cities saw strong preleasing of office space in under
construction buildings. Many corporates decided to consolidate their office
space by vacating more than one smaller spaces in central business districts of
cities and instead taking up one or more larger spaces in cheaper secondary and
suburban districts.
A decline in absorption is expected in 2012
because of corporates postponing their expansion plans. "Demand from domestic
occupiers, although robust so far, is also under question due to concerns over
domestic economic growth, delays in policy reforms, a projected slowdown in
corporate earnings and moderately high core inflation. However, large IT
occupiers seeking to consolidate or relocate are expected to generate
significant demand for IT SEZ and IT buildings in peripheral districts,"
says JLL in its report.
