In a clear indication of a slowdown in the commercial real estate market in the National Capital Region (NCR), the total office space acquired by companies in the NCR went down to 0.81 million sq ft in the quarter ended June 30, from 1.5 million sq ft in the quarter ended March 31.

Experts attribute this slowdown to high rentals, which they feel cannot be sustained in the long run. They say that a correction in rental values of commercial properties in the area is inevitable. According to a study on Delhi’s office-market, conducted by DTZ, one of the leading real estate consultancies in the world, there also is a clear slowdown in the rate at which commercial rentals have been growing in the NCR. For instance, in Delhi’s sub-urban business district (SBD), comprising mainly of Gurgaon and Noida, rentals have risen by just 5-7% in the April-June quarter, as against a 15% growth in the last quarter. The rentals in Gurgaon have gone up 5-6%, while that in Noida have risen by just 2-3%.

There continues to be a robust demand for quality office space in the NCR. However, high rentals are a clear deterrent in big deals to fructify, mainly in Gurgaon. Players in the real estate sector are also wary of such high rentals, and agree that there will be some correction by the year end. In case of Gurgaon’s office market, the maximum sustainable rental would be about Rs 100 per sq ft. Anything beyond this may see some corrections. According to Omaxe chairman Rohtas Goel, there may be minor corrections over the next 3-4 months in the Gurgaon market. However, the demand supply gap in commercial real estate is quite significant.

The DTZ report says that rentals quoted by various properties in Gurgaon vary from Rs 80-150 per sq ft. Interestingly, of the 0.81 million sq ft office space occupied in the NCR during the quarter, 0.54 million sq ft has been absorbed in Gurgaon alone. It is mainly because of the lower limit of Rs 80, which is fairly viable. The two biggest office space deals in the quarter include IT company WNS and a Delhi-based media house taking 1 lakh sq ft each.

News Source: Economic Times
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