The prime office space segment across key cities in India are witnessing an improvement in sentiment from last year. According to CBRE’s latest report, India Office Market View Q1 2013, prime office space absorption across key cities in India witnessed approximately 17% increase in Q1, 2013 as compared to Q1, 2012.

Transaction activity during Q1, 2013 was dominated by Mumbai, Bangalore, Chennai and NCR (National Capital Region), representing about 90% of the total transacted space during the quarter. Occupier focus continued to be on consolidation and more efficient use of existing portfolio. Transactions took much longer to conclude and majority of the demand was for smaller floor plate sizes.

However the q-o-q figures showed a decline of approximately 6% when compared to 7 million sq.ft. absorption in Q4, 2012.

Commenting on the findings of the report, Anshuman Magazine, Chairman and Managing Director of CBRE, South Asia, said, This is a positive sign for the Indian economy reflecting business expansion along with consolidation. This also indicates that the downward trajectory should be plateauing in the near future. However the Indian office market will continue to take cues from the existing economic sentiment globally and within the country and it is too early in the year to take a position on the market performance.”

Rental values continued to witness downward pressures across most micro-markets as occupier expansion faced cost pressures and consolidation continued to be the key theme. Rents were stable in suburban office markets such as Gurgaon, Noida, Outer Ring Road, Whitefield, Hitec City and Gachibowli, among others. It is anticipated that downward pressure will continue to persist in most markets in the country in a short to medium term.

With cost reduction being a primary concern, occupier sentiment remained cautious amidst the present economic outlook, which continued to have a negative impact on leasing activity across most micro-markets. Majority of the corporates continued to review expansion plans and looked at improving existing space utilisation to control costs.

Demand is expected to weaken in most markets and majority of the leasing deals are likely to be for small and medium sized office space. Supply levels should continue to exert pressure on rental movement and market recovery in most micro-markets.

The India Office Market View is a quarterly report which provides a summary of office rents across key cities in India. It includes average rental rates for the coming quarter as well as an outlook for the next quarter. The India Office Market View report also covers Grade A office space rentals across the cities of NCR, Mumbai, Bangalore, Chennai, Hyderabad, Pune and Kolkata.