The residential property market may have begun to lose steam but commercial rentals continue to rise. A report by real estate adviser DTZ India finds, corporate demand will push rentals by another 20% over the next three months.

Leasing office space in a city's CBD is set to get tougher. Rentals have already risen over 100% across the CBDs of all metros last year. And according to a report by DTZ India, commercial rentals are likely to see a 10- 20% jump by the next quarter. That is because demand continues to outstrip supply. While Bangalore added over 14 million sq ft of grade A office space last year, the NCR witnessed office space supply of 10 million sq ft. And in Mumbai, commercial space of 6 miilion sq feet was built. But corporates are still scouting for more room.

In the near future, there will be an increase in the rentals in the CBDs of most cities. And the reason is, because of very limited or no new supply being added, and the demand is continuing.

Experts predict, demand for quality office space to continue growing by 30-35% this year, but most corporates will have to settle for space in the city's suburbs, as space in the CBDs is exhausted. According to the report, Bangalore's outskirts will see a supply infusion of approximately 13 million sq ft, while Chennai and NCR will add between 15 to 17 million sq feet of commercial space. And about 25% of this expected supply, has already been booked.
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  • Prices of commercial properties set to head south, study says

    Prices of commercial properties across all major Indian cities have raised and are set to fall in the next quarter, say a report by, DTZ India.

    The report says that, except Mumbai where demand continues to outpace supply, the market is headed south as supply is expected to overshoot demand.

    The report covers seven cities which include New Delhi, Mumbai, Hyderabad, Chennai, Bangalore, Pune and Kolkata.

    The report says that in New Delhi overall absorption of commercial space has gone down to 0.81 million sq. ft in the April-June quarter. Growth in rentals has also slowed down to 5-7% in the April-June.

    Bangalore saw vacancy levels of around 35% in newer business areas, owing to excess supply.

    Hyderabad is likely to see an oversupply as 7.1 million sq. ft is expected to come into the market, while demand is pegged at 4.6 million sq. ft for 2007.

    It said that Pune was already reporting high vacancy levels in the newer business districts of Viman Nagar, Kalyani Nagar, Hadpsar and Magrapatta, and rentals remained constant quarter-on-quarter.

    Chennai saw a total addition in supply of 3.4 million sq. ft, while only 0.4 million sq. ft was absorbed.

    Well, Mumbai is expected to see prices rising as the demand-supply gap in the city are still around 8%. As a result, rentals have increased between 8-16%.

    Rents are expected to be high in 2007 and to stabalize only in the first half of 2008.