‘Commercial space demand to dip 15%’

“If one compares these figures to what was recorded during the 2009 slowdown,when the demand has fallen to 22 million sq ft,it doesn’t look so bleak. However,if the Eurozone crisis worsens we may have to rework our estimates,” said Anshul Jain,DTZ CEO (India). He added that the demand would be most hit due to the caution exercised by IT-ITES companies owing to the spending cut of US and European companies.

Ramesh Nair,managing director of Jones Lang LaSalle (India),said the uncertain economic environment will hit absorption of fresh office space while tighter lending norms for commercial projects would affect the construction pace. A recent report by real estate consultants CB Richard Ellis pointed out that in 2011,occupancy rates and rentals remained low across Nariman Point,Lower Parel,Worli-Prabhadevi,Bandra-Kurla Complex,Andheri,Powai,Navi Mumbai and Thane micro-markets of Mumbai. This lead to a significant delay in projects and much of this delayed supply will be released in the market in 2012,leading to a further drop in rentals and increase in vacancy levels.

“On the brighter side,these market conditions will continue to favour tenants in most of Mumbai’s micro-markets by way of a larger bouquet of options,rational pricing and various concessions,” he said,adding that the current market is best suited for consolidation and relocation — an option several Mumbai-based occupiers are likely to seize upon in 2012. “Also,demand for smaller offices in grade A projects is expected to increase as more small and medium-sized Indian corporates take advantage of the rationalised pricing and buy space,” he said.

Analysts said while the flux of commercial property will affect the market in 2012,with the Central Bank expected to implement a downward revision of interest rates in 2012,things may improve for the segment next year.

“The inflation is under control and interest rates have started to thread in the right direction. All these factors will see the market growing in 2013 and leading this growth would be the banking,financial services and insurance sectors,” said Jain.