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Commercial Sector of real estate is recovering faster.

July 16, 2015 | By

An improved market sentiment sees a pick up in demand in the second quarter of calendar 2015.

After a smart turnaround in 2014, India’s commercial real estate sector across major metros is continuing to see a good off-take of office space. An improved market sentiment saw a pick-up in demand in the second quarter of calendar 2015 with more than 8 million sq. ft. of commercial office space taken up across seven major metros. This translates into a 70 per cent growth over the first quarter of 2015, according to a report, India Office market View for Q2 2015 by leading commercial real estate services firm, CBRE.

“Following a subdued first quarter, which is usually a period when corporates plan for annual real estate requirements, the second quarter witnessed a rise in office space absorption,” Anshuman Magazine, CMD, CBRE South Asia, said.
CBRE said the e-commerce segment emerged as the second largest occupier of office space with a share of about 17 per cent of the total transacted space. BFSI was at 16 per cent with IT/ITeS sector the top driver with a 36 per cent share.

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“The year 2014 was an exceptional year and the office market turned around with the new government taking office and hopes of a reform push,” said Samantak Das, Chief Economist, Knight Frank Research.

“The IT sector and e-commerce players lead the way in cities such as Bengaluru and Pune. But growth from these sectors will rationalise and taper off at some point.”

At a sectoral level, the lack of funding options is hurting the industry, which is what ails the residential segment where problems are compounded by poor offtake. Borrowing from the non-banking sector at 20-25 per cent rates increases the risk to the developer.

Mr. Das said that although the investment cycle seemed to have picked up and consumption expenditure was exhibiting signs of moderate growth, there were no visible signs in the economy to sustain accelerated growth of the office market.Rohit Gera, Managing Director, Gera Developments, which has developments in Pune, Bengaluru and Goa, said, “clearly e-commerce is the flavour of this season but the spurt is unlikely to persist over the medium-term.”

“There are hopes that the office market rubs off on the residential segment, which is seeing poor demand and poor sales velocity,” he added.

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