Cautious approach by global and Indian companies owing to slower economic growth, global uncertainties, high inflation and low industrial output led to a 23 per cent decline in office space absorption across the top eight cities since last year.
This was highlighted in the annual report by real estate consultant Cushman and Wakefield covering NCR, Mumbai, Bangalore , Chennai, Hyderabad, Pune, Kolkata and Ahmedabad.
Bangalore noted the highest net absorption of approximately 7.29 million square feet (msf) followed by Mumbai that saw 6.26 msf of net absorption for the year.
Majority of the companies put a hold on or revisited their expansion plans to commit to lesser than expected office space in the year. The total net absorption for 2012 was recorded at 29.05 msf against 37.77 msf in 2011.
There was a corresponding decline in the total supply in the same period by 10 per cent over the last year and it stood at 35.30 msf against 39.35 msf, according to the report.
“Almost all locations which are driven by the IT/ ITeS and related industries recorded a slowdown in absorption,” said the report.
Chennai saw the highest decline in absorption by 51 per cent on year-on-year basis over last year.
Leasing activity, which indicates net absorption declined in all cities except Ahmedabad and Mumbai that saw a rise of 38 per cent and 9 per cent, respectively over the last year.
Sanjay Dutt, Executive Managing Director, South Asia, Cushman and Wakefield, said: “Most corporate houses are cautious and have concentrated on increasing the efficiency of their existing office spaces looking at alternative workplace strategy to include policies like remote or flexible workstations or hours.”
“Corporate houses have also considered relocation and consolidation on attractive terms while those with cash surplus have considered buying office spaces as they want to capitalise on the oversupply, low capital values and use surplus capital to gain from acquisition of long term strategic corporate office assets’’, he added. According to Dutt, some other innovative strategies adopted by many corporate houses include negotiation on rent renewal or terminations in advance to capitalise on attractive office space value.