Property market sees improvement in Q1 2012
According to the latest RICS India Commercial Property Survey, an easing in global strains has led respondents to upgrade their expectation in both the occupier and investment markets in the country. With real estate clearly feeling the effects of the softer macro environment in the previous two quarters, the market is now witnessing improving results across several indicators, which could signal the beginning of a turnaround.
Firming occupier demand has resulted in rental expectations turning positive this quarter as opposed to being negative during the last three months of 2011. Market activity indicates that rental value for retail properties, particularly high streets has seen an increase in 2012, while supply of other retail space such as malls is also on the rise. While demand for office space still remains relatively sluggish, there has been some uptake in absorption this quarter as compared to previous months.
The investment side of the market is also seeing a turnaround in sentiment, with enquiries rising fairly robustly after declining for the past nine months. Significantly, expectations of future transactions have improved strongly having a positive impact on capital value expectations as well.
Simon Rubinsohn, RICS Chief Economist, said: “The better tone to sentiment in the report is encouraging and consistent with the improvement in macro news flow during the first quarter. Indeed, the number of real estate markets around the world showing better results both from an occupier and investment perspective is increasing. Although there are still significant risks to the global economy, the drivers of growth are becoming more broadly based which should help underpin a firmer trend in activity as 2012 wears on.”
He said the key area of concern remains Europe with much of the continent either in or flirting with recession. The resilience of Germany should, however, provide a measure of support and gradually help bolster growth elsewhere on the continent.
"The Markets are reasonably buoyant fairly good absorption of office space at attractive values local companies and multinational companies are expanding," said Farook Mahmood, CMD, Silverline Group
Ravi Ahuja, ED, Executive Director, Cushman & Wakefield said that the current office market across India / Mumbai is witnessing positive levels of activities in terms of leasing from corporate users, given that many multinational and Indian corporates are considering consolidating or relocating their operations. Few sectors are also witnessing growth in their operations leading to expansion and incremental demand. Cost rationalisation is a key parameter for corporate’ in 2012. “All major office micro-markets continue to witness an oversupply of office space as average vacancy levels have touched double digit numbers with exceptions being Bandra Kurla Complex and Goregaon East in Mumbai, Gurgaon in NCR and CBD/ Off CBD locations in Pune. As a result, over all, rental values are expected to remain stable with a downward bias except for the above mentioned locations. Mumbai continues to see significant relocation activities from South towards north Mumbai. Investors are adopting a cautious approach and are looking for safe rental yields of upwards of 10 per cent annually,” said Ahuja.