At the time when the fears of slowdown are a major issue in the real estate sector, the fresh office space supply has declined by 40% in 2011. The reasons for such drop could be attributed to delays in real estate project completion, piling of vacant stock and also weak global economic cues even though the investments in the Private Equity (PE) for such space was increased at that time.
According to a report released on Wednesday by a property consultant, CB Richard Ellis, in 2011 30 million sq ft. of new office space entered the markets as compared to the 55 million sq ft. of the previous year. According to Mr. Anshuman Magazine, chairman and managing director, CBRE South Asia Pvt. Ltd. the deterrents for the developers to develop during such time was tight liquidity situation, high interest rates and uncertain demand. He also added that such situation is here to stay till the global and Indian economic situation stabilizes.
The report further included that leading office hubs in Bangalore and Mumbai experienced negligible supply in grade A and premium office segments as existing vacancy pressured led the real estate developers to delay their projects to 2012. Also interestingly the absorption of the office space also decreased in 2011 by 12% as the companies are slowing down their expansion plans.
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