Slowdown hits commercial real estate market

The commercial property market was the only hope for builders already reeling under record low sales in the residential segment has hit a road block.

As per latest RICS India Commercial Property Survey, after a period of strong growth witnessed in occupier and investment demand over the previous few quarters, the market now looks to be cooling down.

In Q4 2011, there has been a marginal drop with respect to global rental expectations, with India now ranked at 24 in comparison to the previous quarter’s 19. Even on the investment side, the market does not seem to be fairing any better, with investment enquiries falling for the third consecutive quarter.

“During Q4, 2011, we witnessed a continuing slowdown in supply of prime office space coupled with a decline in office space take up. The continuing volatility in the global and Indian financial markets, coupled with rising inflation and interest rates, has led corporates and developers to be cautious in their expansion plans,” says Anshuman Magazine, chairman and managing director CBRE South Asia and chairman, RICS South Asia Board.

New projects in Q4, which were rising since past 15 months were being stalled as the demand from tenants dried up in the second half of the year. Available space to occupy also continued to rise,” mentioned RICS.

Further, the investment side of the market also witnessed subdued activity as the demand from investors fell for the third consecutive quarter and capital value expectations sunk to the lowest reading for over two years.