Saturday 27 October 2012

Chennai outshines Hyderabad, Bangalore in office space absorption

According to a Cushman & Wakefield report, among the three southern cities – Chennai, Bangalore and Hyderabad, Chennai witnessed the highest absorption of office space at 1.32 million sq. ft in the third quarter of 2012, followed by Bangalore which witnessed an absorption of 1.25 million sq. ft and Hyderabad which saw just about 0.50 million sq. ft. In terms of total absorption during the quarter, Chennai’s office market also saw an increase of 35 per cent over the previous quarter – the one that marginally surpassed Bangalore.

The report attributes this trend to global economic conditions, which has affected the uptake of office space in Bangalore. The global economic conditions appear to have cast a shadow on the city’s real estate, particularly the office space market which registered a drop by nearly 50 per cent, says the report.

As per the report, Hyderabad too registered a drop in the office space market by almost 50 per cent. The Cushman & Wakefield report described the absorption as ‘very meager’ in the 2012 third quarter.

Driven largely by the IT and the ITeS sectors, Bangalore and Hyderabad are feeling the impact of rationalisation of space, in addition to an overall cautious approach. These two factors have had emphatic impact this on segment.

The supply side too, in-keeping with the changing scenario, remained subdued as far as the total new supply for the third quarter is concerned.

The third quarter absorption in Hyderabad amounted to 6, 20,000 sq ft; a drop of 31 per cent in fresh supplies over the previous year. The impact of a restrained office market activity is witnessed in the vacancy levels too which remained mostly unchanged over the previous year. The rental values have by and large remained stable for the said period as well.

On similar lines, Bangalore too registered a drop in office space uptake in the first three quarters of this year, as compared to the same period last year. The total absorption recorded till date amounted to 3.95 million sq ft, which is a drop of 54 per cent over the same period last year.

Kanchana Dwarakanath, Magicbricks.com Bureau

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