Commercial realty sales retreat amid global IT slowdown

Pre-slowdown IT companies were the biggest consumers of office space. But with the tech sector now shaken by global jitters - the impact is also weighing down on the commercial real estate sector. Office transactions have plummeted more than 21% in 2012 so far, reports CNBC-TV18's Priyanka Ghosh.

IT job aspirants and the offices that had hoped to house them are both going through testing times. With most leading companies having deferred hiring and expansion plans, absorption of office space has declined 21% in the first half of 2012 compared to last year. This data, released by Cushman & Wakefield is corroborated by others as well.
Anshul Jain, chief executive officer at DTZ India says, "If you compare the first half of this year to the first half of last year, the numbers look even starker. In the first half of 2011 the market absorbed 18 to 19 million square feet. Compare that to the first half of this year, the absorption is about 11-12 million square feet. So demand is down by about 45% YoY and much of this really correlates to the downward revision of the GDP."
The demand slowdown is most evident in the NCR market, where transactions have collapsed by 53% in the first half of 2012 Vs the first half of 2011, followed by Bangalore, where absorption rates have fallen 46% during the same period.
Developers though are hoping the situation will improve over the long term.
"As far as the IT sector demand is concerned, we are looking at people who have been in the IT sector for the last 10-15 years and two third of the IT employees today have been hired in the last seven years. These are going to be our future customers. Keeping that into mind, I do believe the next ten years, as far as real estate in Bangalore is concerned, it will be greatly benefitted due to the IT sector demand", says JC Sharma, vice Chairman & managing director of Sobha Developers.
The situation is no better in the financial hub, Mumbai, which continues to witness low demand from the banking and financial industry, adding to the overall dip in the fortune's of the country's commercial real estate sector.
Industry experts caution that going forward, the sector will go through volatility in rentals and supply, slow construction and an overall downward trend in demand and transactions. Some recovery can only be expected if and when global market cues turn positive once again.