The demand for office space continued to weaken across India in the January-March 2012 quarter because of slowing economic growth. In Mumbai and the national capital region of Delhi, occupiers focused on relocation and consolidation to reduce their overall rental cost for office space. Deals for large sized spaces were limited, says a recent report from CBRE. In Bangalore, leasing slowed down further as the approval process for leasing new space became longer. "Most firms were reviewing their footprint and were seeking to utilize their existing office space as effectively as possible as opposed to taking up additional space," says the report. According to CBRE while landlords have managed to hold on to rents even in the face of weak demand, as the market slows further, they are likely to come under pressure to reduce rentals. While some domestic companies continued to acquire land in tier-II and III locations for development of office buildings, there are concerns around availability of quality staff in these areas. "Occupiers therefore remain focused on tier I markets only," says the report. Many traditional occupiers in the financial capital Mumbai looked at taking up back-office space in Pune or in cities in the south. "The renewed focus on cost effectiveness has resulted in companies becoming flexible towards setting up front offices in the suburbs instead of Nariman Point or Bandra Kurla Complex," says CBRE. In the quarter, IT and financial services firms focused on closing small office space deals as larger deals are still taking time due to longer approval processes. Mumbai has seen a steady flow of back office expansion by financial services companies as well as media companies. Apart from the usual activity by IT firms, Bangalore saw one notable deal by a large US-based financial institution that leased a large campus on the Outer Ring Road.
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