Mumbai way behind in office space absorption in first half this fiscal

According to the latest office market report by global real estate consultants Cushman & Wakefield, the net office space absorption increased 16% across 8 major cities in India in the first half of 2014 (Jan-June) compared to the same period last year.

However, Mumbai recorded a 22% decline along with Kolkata (-36%) and Pune (-17%) on a year-on-year comparison. Ahmedabad recorded the highest growth rate (172%) followed by Chennai (115%) in this sector.

Sanjay Dutt, executive managing director, South Asia, Cushman & Wakefield, said: "Office markets have reacted positively to the outcome of the general elections that has encouraged corporates to view the markets positively. There was an increase in office space absorption in the first half of the year and it's expected to go further up in the second half.

"The recent announcement in the Union Budget proposes a reduction in FDI investment from US$ 10 million to US$ 5 million, which will help boost investments, especially in tier-1 cities like Mumbai where value of properties attracts PE despite their size. Tier-2 and tier-3 cities will also see increase in activity. Another policy that is expected to create an impact is the road-map opening avenues of real estate investment trust (REIT), which is expected to play a crucial role in bringing in investments and provide exit route to investors in due course," Sanjay Dutt added.

An expert in real estate field said though the election result had excited many city markets, Mumbai had remained unaffected. "The reason is that there is no significant growth in the industrial and services sectors here. Besides, the cost of office space is quite high in Mumbai compared to other cities," he explained.