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With no major pre-leases signed in the first quarter of 2013, Bangalore’s office space absorption has slackened.
“This is the second consecutive quarter decline and office space absorption declined by 36 per cent quarter on quarter (Q-on-Q),” said Rohit Kumar, Head of Research, DTZ India, a global property services company.
“Office space absorption at one million square feet is equivalent to less than half of the average quarterly off-take during 2012,” he added.
Slight rise in CBD
Across micro-markets, only the central business district (CBD) in and around MG Road saw a marginal increase in absorption and of these IT and engineering firms accounted for 50 per cent and 32 per cent of the absorption respectively, followed by minor contributions from companies in consulting, healthcare, telecom and banking financial services and insurance (BFSI) sectors.
Talking on vacancy, Kumar said, “In spite of the lower absorption, the overall office space vacancy ratio in the city dropped to 13.2 per cent from 13.8 per cent in the previous quarter.”
Secondary business districts (SBD) and residential hubs such as Indiranagar, Koramangala etc and peripheral business districts (PBD) along the outer ring road on Hosur road, Sarjapur road and Whitefield area recorded a tightening in vacancy ratios, while the CBD was negatively impacted by continued relocations and consolidations.
New supply
As for the new office space supply in Q1, it stood at a moderate 0.7 million square feet, on par with the level recorded for the previous quarter.
However, this was a decline of 60 per cent year-on-year. The total amount of Grade A office stock in the city now stands at 94.2 million square feet. On the forthcoming supply for 2013 it stands at 9.6 million square feet, followed by 15 million square feet in 2014.
Kumar said, “The impact of the slowdown in demand for office space has started to negatively impact rents, with the average achievable rent in the PBD market declining by 4 per cent quarter-on-quarter.”
“This was the first quarterly rental decline since the market recovery began in late 2009. However, movement in micromarkets was heavily influenced by local factors, such as the amount of forthcoming supply,” he added.
In general, developers became more amenable to negotiation and offered competitive rents. The exception to this was SBD, where rents increased by 9 per cent quarter-on-quarter due to limited available space.
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