Tuesday, September 16, 2008

Office rentals get cheaper by 50 percent

New Delhi: The slowdown in the real estate sector remains unending with retail and office rental prices across the country witnessing a sharp drop. During the last two months, there has been a 25-50 percent drop in both retail and office rental values in some micro markets such as Gurgaon and Greater Noida. In Saket (south Delhi), the rates have dropped by 30-35 percent. Overall, the rental rates in cities such as Kolkata, Chennai, Mumbai, Pune and Bangalore have also dropped by 25-30 percent, reveals current market statistics. 

"The market is going to witness a 25-40 percent drop in the retail rentals as all big or small retailers are finding it tough to survive in this very high rental market," says Kishore Biyani, CEO, Future Group. "Many smalltime or vanilla retailers may have to close their shop in this kind of condition. We have changed our business model and are now operating on a revenue-sharing model in malls. Productivity is a key factor for any retailer to operate efficiently in a mall, in case of a leased deal," he added.
According to industry sources cited by The Economic Times, initially, most malls in the same micro-market had similar rental rates. But as they became operational, the rentals started to get aligned with revenues and footfalls. In the office space, the second quarter of this year witnessed a total supply of 4.3 million sq ft in the NCR region, of which 60 percent was for IT/ITeS but interestingly, the demand was down to 3.3 million sq ft only.

Latest reports indicate that because of a dip of as much as 30-40 percent in the transactions this year, there has been a 35-40 percent over-supply in residential apartments in the last eight months. 

Raminder Grover, CEO of Homebay Residential, Jones Lang LaSalle Meghraj said, "The rise in interest rates has affected the demand for residential space. Higher interest rates have combined with certain other factors such as temporarily reduced buying power due to stock market fluctuations to reduce the demand for high-end residences. Most of the over-supply consists of higher-priced residential units in prime localities that investors cannot resell quickly, since the demand for them has been impacted." 

In fact, both investors and end users of the residential property sector are anticipating a blanket correction in prices in the wake of the over-supply situation leading to a further slowdown. 

siliconindia news bureau

1 comment:

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