Drop in office space rentals

Office space rentals have dropped five to 20 per cent across cities in the first quarter of 2009 as compared to the last quarter.

Global real estate service provider CB Richard Ellis’ office space review report says this is due to sluggish demand and the tendency, especially by the financial and IT sectors, to postpone real estate initiatives.

NCR

Connaught Place saw enhanced levels of second-hand space with tenants relocating to cost-effective destinations. With more malls becoming operational in the Saket District Centre, basic infrastructure was stretched.

Supply released in the last quarter (about 0.22 million sq.ft) was not absorbed, leading to a vacancy of around 35 per cent. Gurgaon continued to be slow with the IT and financial sector facing the heat of the economic downturn.

Average rentals at Connaught Place for March were Rs 240 a sq.ft a month compared to Rs 280 a sq.ft in December.

Rentals at Nehru Place were Rs 180 a sqft against Rs 225 in December. IT space in Gurgaon averaged Rs 45 a sq.ft against December rentals of Rs 55, and at Noida it was Rs 38 a sq.ft, against Rs 40 a sq.ft in December.

The central business district of Nariman Point witnessed a significant correction in rentals over the last 6-9 months.

Mumbai

With additional secondary stock added, the vacancy level rose to 15 per cent.

Average office rentals were around Rs 350 a sq.ft in March as against Rs 400 seen in December.

The alternate business district of Bandra Kurla Complex and Kalina has a ready supply of about one million sq.ft of office space, with an additional 0.5 million sq.ft supply expected in the next quarter. Rentals were at Rs 300 a sq.ft, compared to Rs 350 in December.

The secondary business district comprising western and eastern suburbs saw a sharp correction. Andheri, Ville Parle and Jogeswari dropped to Rs 150 a sq.ft in March as against Rs 175 in December last.

Bangalore

Most transactions in the central business district of MG Road, Richmond Road and Residency Road were in the small- and mid-sized segments.

A spate of relocation activity is expected as reducing cost, particularly real estate related, drives a number of companies to identify cheaper real estate solutions.

Rentals at MG Road and Residency Road averaged Rs 75 a sq.ft a month in March as compared to Rs 85 in December. Those in Koramangala and Indira Nagar were Rs 50 against Rs 60 earlier. Rentals at Whitefield and Electronic City were down to Rs 25 per sq.ft compared to Rs 27 earlier.

Chennai

The central business district, which includes areas of Anna Salai, T Nagar, RK Salai, Alwarpet and Nungambakkam, saw a lower level of demand in the March quarter.

However, overall vacancy levels remained low at about 5-6 per cent.

Average rentals were down to Rs 70 a sq.ft in March as compared to Rs 76 in December 2008.

The suburban business district that includes Velachery, Perungudi and Mount Poonamallee Road saw an absorption of about 0.2 million sq.ft, compared to 0.75 million sq.ft a year ago. Rentals were around Rs 38 a sq.ft, while it was Rs 41 in December.

Vacancy levels at the micro market – Perungalathur, Sholinganallur, Siruseri, Ambattur and GST Road – were 18-20 per cent. Here, rentals were Rs 25 a sq.ft compared to Rs 29 in December.

Hyderabad

Leasing in the CBD micro markets of Begumpet, Somajiguda and Banjara Hills witnessed a slowdown in the quarter ending March 2009 and vacancy levels rose near 10 per cent. Rentals were lower at Rs 55 a sq.ft in March compared to Rs 60 in December.

The IT corridor of Hitec City Madhapur, Kondapur, and Gachibowli dipped to Rs 35 a sq.ft from Rs 40 a sq.ft.

Pune

Like the last quarter, the micro markets of MG Road, Kalyani Nagar, Koregaon Park and Bund Garden continued to see demand for smaller format office spaces.

Further, softening of prices is providing an opportunity to occupants of Grade-B premises to relocate to better spaces.

The peripheral business district – Hinjewadi, Kharadi, Hadapsar, Talawade and Kharadi – remained the choice for large IT office requirements.

Rentals at Shivaji Nagar, Bund Garden Road and Koregaon Park were Rs 70 a sq.ft in March compared to Rs 90 in December. At Hinjewadi, Kharadi and Hadapsar it was Rs 35 a sq.ft in March, compared to Rs 42 a sq.ft in December.

Kolkata

Demand in office space leasing market in the central business district of Chowringhee, BBD Bag, Park Street and Camac Street was extremely low, leading to high discounts on quoted prices. Rentals were at Rs 100 a sq.ft in March as compared to Rs 120 in December.

Available supply in the secondary micro market, including EM Bypass, Kasba-Gariahat and Sarat Bose Road, was vacant. Vacancy levels were around 30 per cent in Kasba.

The peripheral market of Salt Lake and Rajarhat has been hit with high inventory pile-up and low demand. Rentals were at Rs 45 a sq.ft in March as compared to Rs 55 a sq.ft in December.