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Services sector to revive office space demand: Experts

Last Updated: Sunday, September 30, 2012 - 12:28

Mumbai: At a time when the real estate sector is slowing down, mainly due to high interest rates and unfavourable government policies, the services sector is expected to revive demand for office space with an estimated absorption of 28-30 million sq ft by the year-end, industry experts say.

Being the largest contributor, nearly 63 percent, to the GDP, the services sector is likely to drive demand for commercial real estate, Jones Lang LaSalle India senior research manager Subash Bhola said.

In the first quarter of the fiscal, when all other sectors (including industrial and agricultural) performed poorly, the services sector clipped at a healthy 8.5 percent.

"An 8.5 percent growth in the services sector in FY12 is an indicator that a major slowdown in office real estate demand is not likely to occur as it generates the highest demand for office space," Bhola said.

The service sector comprises banking, financial services and insurance (BFSI), information technology, consulting, trade and communication.

The absorption is likely to stable in short- and medium-term mainly on the back of favourable office market conditions for the corporate world as there is a sizable availability of ready or near-ready supply, Cushman & Wakefield South Asia executive managing director Sanjay Dutt said.

Also, double-digit vacancy numbers are helping in keeping prices at stable levels, he added.

"The domestic office market is expected to remain stable in the short to medium-term and we hope to see stable absorptions to the tune of 28-30 million sq ft by 2012-end," Dutt said.

According to a survey, around 21 million sq ft of office space was absorbed in Delhi NCR, Mumbai, Bangalore, Hyderabad, Ahmedabad, Kolkata, Chennai and Pune in the January-September period.

"Even while IT/ITeS sector remains the largest in terms of volume in office space demand, the real drivers will be the BSFI sectors coupled with telecom, consulting, etc. that will keep the momentum upbeat in the next few months," he added.

Dutt further said office space is being looked at as attractive investment options at current values by both domestic as well as multinational companies, who are making strategic asset purchases here on the back of slight dip in prices.


First Published: Sunday, September 30, 2012 - 12:28
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