India; office space; an oversupply?

The demand for commercial real estate is outwitting the supply in metros. Contrary to this, small cities are witnessing an oversupply situation that will continue in the short to medium term, says global property adviser DTZ.

With a teeming rental segment, the demand for A-grade leasehold commercial space continues to yield healthy results. Delhi-NCR region which was earlier been the most lucrative place for real estate is expected to see an excess supply of 20 per cent. Displaying the same examples are Bangalore (38 per cent), Chennai (200 per cent), Pune (146 per cent), Kolkata (66 per cent) and Hyderabad (33 per cent).

Mumbai has emerged as the only exception which would not face the oversupply situation. It’s estimated supply in 2007 stands at 6.9 million sq ft. against the absorption of 7.5 million sq ft.

Current scenario clearly indicates a constant rise in segment of office space rentals which are likely to hit the mark in the next 6 to 12 months, says Ankur Shrivastava, Managing Director of DTZ.

Interestingly, the situation of oversupply is likely to bring corrections in office rental values in some peripheral locations. The correction would not be driven by lack of demand but due to the oversupply construction, says the data showcased by the study.