Office space demand set to revive, may grow 21% in ’13

Tags: Real Estate
Office space demand is expected witness an year-on-year increase of 21 per cent to 38 million sq ft in the calendar year 2013, mainly driven by demand from information technology (IT and IteS), banking, financial services and insurance (BFSI) sector.

This is a substantial increase compared with the anticipated take-up in 2012, which is expected to have fallen by 13 per cent over the demand levels of 2011, according to a recent report by multinational real estate consultancy firm DTZ.

Leading developers across the country believes that the office space demand is likely to revive in 2013 as demand-supply gap is reducing.

Boman R Irani, chairman and director Rustomjee Group, said for the past two years, there has been very less addition of office space as there was an oversupply situation and developers mostly focused on residential segment. Now with demand slowly picking up, office space absorption is likely to increase in 2013. He expects a 10-15 per cent price increase in commercial space rentals as demand starts reviving.

Jackbastien Nazareth, chief executive officer of Puravankara Projects, said, “In the past two years, developers held back their projects due to slackening demand. However, now companies are back to hiring employees and their order books have also increased. With companies looking at expanding, real estate demand will be boosted.” He too, expects rentals for commercial properties to increase gradually.

“The demand forecast has been generated by analysing the historic growth rate and forecasted growth projections of the sectors, employment growth trend and per employee earnings. These parameters have exhibited a strong correlation coefficient with the office space take-up forecast for 2013,” said Aniruddh Wahal, director, occupier services, DTZ.

The two primary sectors, IT and ITeS and BFSI, form 70 per cent of the total office space take-up. In 2013, IT/ITeS is expected to grow at 13 per cent. The average per employee workstation space in this sector is 80 sq ft. The sector is expected to require additional IT office space of 15.96 million sq ft to accommodate additional work force of approximately 200,000 sq ft. The office space demand from the technology sector in 2013 is, therefore, projected to increase by 34 per cent.

The average per employee workstation space in BFSI sector is 100 sq ft. The sector is expected to require additional IT office space of 10.4 million sq ft to accommodate additional work force of approximately one lakh. The office space demand from the sector is likely to increase by five per cent in 2013, according to the DTZ report.

Rajeev Talwar, executive director of DLF, however, said, “Right now, the demand for office space is not that great. Going forward, the revival of demand in commercial space depends on how the economy performs.”

The year 2012, which started on an unenthusiastic note due to the global as well domestic economic turmoil, is now showing initial signs of recovery.

India is expected to witness a reasonable GDP growth of 5 to 6 per cent in 2012-2013. These emerging positive indications are expected to stimulate real estate sector in the country, the report added.

jharnamazumdar@mydigitalfc.com

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