Indian office rental rates slump by up to 37 per cent

Office markets across India showed a decline in rental values in the Jan-March period from the previous quarter due to sluggish demand, according to a report by global real estate services firm Cushman & Wakefield, released on Wednesday.

According to the study that covered eight Indian cities, supply outstripped absorption by 45 per cent in the January-March period of 2009. As a result, drop in rentals in major business districts of the country ranged between three per cent and 37 per cent as compared to the previous three months.

Fresh office space supply in Ahmedabad, Bangalore, Chennai, Hyderabad, Kolkata, Mumbai, the Delhi National Capital Region, and Pune was 11.5 million sq ft, but absorption during the quarter was just 5.78 million sq ft, the report said.

"The first quarter of the year can be termed as the weakest so far in terms of commercial office take up across major cities in India as compared to a similar period for the last 2-3 years. Renegotiations and migration to more cost effective locations has been the norm for the cautiously advancing corporate sector," C&W executive director Kaustuv Roy said while releasing the report in New Delhi.

"While rental values are expected to be under pressure in short to medium term, going forward lower rentals are likely to have a more positive impact on the absorption numbers," Roy added.

''Re-negotiations and migration to more cost effective locations has become the norm for the cautiously advancing corporate sector. However going forward we are likely to see supply contraction,'' he said.