Office space absorption fell by 22 per cent during January-March quarter at over 5 million square feet in the seven major cities over a year-ago period as corporates are yet to firm up their real estate plan for the year, according to property consultant CBRE.
"Following a particularly strong fourth quarter of 2014, the first quarter of 2015 reported comparatively slow activity on the office market front across leading cities," CBRE said in a report titled 'India Office, Q1 2015'.
The consultant said that absorption numbers fell as "most corporate space occupiers were still strategizing their real estate plans for the year during the period, with fewer transaction decisions being implemented in the first quarter".
According to CBRE's report, which presented the status of Grade A office space across the country's leading cities, the total office space taken up in Q1 2015 stood at more than 5 million square feet, a drop of about 50 per cent quarter-on-quarter (q-o-q) and a 22 per cent drop year-on-year.
During 2014, the absorption of office space increased by nearly 10 per cent to over 33 million square feet as compared to the previous year.
Commenting on the report, CBRE South Asia Chairman and Managing Director Anshuman Magazine said: "Demand for prime office space is expected to pick up in forthcoming months as occupiers implement their business plans across cities."
The quantum of pre-commitments made during the first quarter would boost space take up, going forward, he added.
"Rental values remained largely stable across most centralised office locations, with the exception of Bangalore where rentals appreciated by 5-6 per cent q-o-q in core office locations due to strong occupier demand.
"Sustained occupier interest in well-leased IT and IT SEZ projects also led to a q-o-q rental appreciation of 5-6 per cent across select micro-markets in Gurgaon, Bangalore, Chennai and Pune," CBRE said.
The report also highlighted that more than 8 million square feet of fresh investment-grade office space was completed across key cities during the quarter.
In line with trends observed during the second half of 2014, the first three months of the year saw completion of a number of large-sized office projects across the Delhi National Capital Region (NCR), Mumbai, Bangalore, Hyderabad, and Pune.
New phases of existing SEZ projects were also completed in Gurgaon.
"A subdued demand climate together with the significant supply addition of new office space led to an increase in vacancy rates in Delhi NCR, while vacancy levels in Mumbai and Bangalore inched downwards," the report said.