Thursday 23 November 2017

India faces office space glut

India’s slowing economy has left its big cities with excess office space, pushing up vacancy rates, freezing development and prompting some builders to convert commercial projects into housing, says a recent report from Bloomberg.

India faces office space glut

Bangalore has the largest office market in India with about 100 million square feet. M Bell, Flickr

December 9, 2013

The building boom ended as economic growth fell by 50 percent, and companies and investors showed little confidence in a government battling corruption scandals.

According to real estate consultant Cushman & Wakefield Inc., six Indian cities are among the 10 office markets with the most vacancies in the Asia region, and vacancy rates in the financial centre of Mumbai and capital New Delhi topped 20 percent in the third quarter, the highest in Asia after Chengdu, China, where 32 percent of offices are empty.

Until two years ago, India held great hopes for global investors with the economy expanding more than 9 percent in the year ended March 2011.

However, as Asia’s third largest economy now faces its slowest expansion in 11 years, as well as the fastest inflation rate among large emerging markets, demand for office space in India has been declining.

The increase in empty office space has made rents in New Delhi and Mumbai less costly with average prime office rents in Mumbai’s Bandra Kurla, now US$581 per square meter a year, while rents in Delhi are US$374 per square meter, according to data from real estate consultancy Jones Lang LaSalle.

To counter the decline in demand, some developers, such as Oberoi Realty Ltd., India’s second-largest developer by market value, are considering converting plans to build offices into residential buildings.

DLF Ltd., India’s biggest publicly-listed builder, switched to plans for housing from offices for a 17.5-acre (7-hectare) plot in central Mumbai before deciding to sell it to the Lodha Group last year, according to Cushman & Wakefield.

The conglomerate Adani Group’s project in Mumbai and developer VRaheja Construction’s redevelopment of a slum in Mumbai’s north, also are among those shifting from offices to residential, the broker said.

 

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