Around 5 crore (50 million) sq ft of office space across the country is currently lying vacant, while the current demand is around 3 crore sq ft, annually according to the findings of real estate consultancy company Jones Lang LaSalle (JLL).
According to a JLL report compiled in seven major Indian cities — the four metros and Pune, Bangalore and Hyderabad — as of December 31, 2012, the total under construction real estate was valued at $173 billion (approximately Rs 10 lakh crore).
Of this, 76 per cent was residential space, while the remaining was commercial. In the commercial segment, 78 per cent was office space and 22 per cent was retail real estate.
“Most of the vacant office space is either in the wrong city or in the wrong part of the (right) city where talent does not want to travel,” Anuj Puri, Chairman and Country Head, JLL India, said.
Wrong cities
Pointing out that over 55 per cent of the demand for office space came from the IT sector, the wrong cities he referred to were Tier 4 or 5 cities like Nagpur, Bhopal or Nashik.
The expected entry of IT and ITES companies did not happen in these cities as the Tier 1 and 2 cities had expanded to accommodate growth, he said.
On the rentals front, rents continued to be below the 2008 levels across all Indian cities, with Bangalore the only exception, where rentals had come on par. However, office rentals in all cities were upwardly bound during the last six quarters.
Residential development
The story of residential development has panned out quite differently, Puri said. With 2008 as the baseline, the capital cost of property in Mumbai was 76 per cent higher, Gurgaon stood 52 per cent higher, while Pune had grown by 43 per cent. Residences had money for developers while the commercial side was struggling, Puri said.
The maximum overhang (excess construction over demand) was in Mumbai, Delhi, while Pune was low at around ten months. JLL has just released it newest white paper on the Pune real estate market.