Office space market in India's top seven cities will see total supply of nearly 243 million sq ft by 2015 and this would be 17% higher than estimated demand, indicating a clear oversupply, Cushman & Wakefield and Global Real Estate Institute said in a report. In Mumbai, supply at 78 million sq ft is expected to outstrip demand by 125% by 2015-end and is expected to experience some downward pricing trend going forward, the report said. Of the seven cities - National Capital Region, Mumbai, Bangalore, Chennai, Hyderabad, Pune and Kolkata - only Bangalore will see demand for office space exceeding supply.
Bangalore will witness the highest demand of approximately 57.30 million sq ft followed by 34.4 million sq ft in National Capital Region and 33.9 million sq ft in Mumbai. However, during this period, cities like Kolkata, Hyderabad and Chennai are expected to see a better rate of growth compared with others. In the next five years, the highest estimated supply of grade A office will be witnessed in Mumbai followed by 40 million sq ft in NCR, 30 million sq ft in Chennai and 29 million sq ft in Pune.
"As the supply will be exceeding the demand for commercial office spaces in the next 5 years this may lead to increase in vacancy. The corporate clients in such a scenario will look for better value proposition in terms of rents, maintenance cost, parking etc, while expanding and consolidating operations," said Arvind Nandan, executive director, Consultancy Services, Cushman & Wakefield India.
Chennai is estimated to be the most active market for real estate with the highest demand growth of 15% compounded annual growth rate during next five years. Kolkata is expected to have lowest demand-supply gap owing to reduced pace of supply and second highest growth in demand during the period.