Office Leasing Rises 2016 with the Sliding Residential Real Estate Market!

 Office Leasing Rises 2016 with the Sliding Residential Real Estate Market!

On comparing the office space transactions in 2014 and 2015, the average transacted office size leases across Bengaluru, Mumbai, Pune and Chennai have increased greatly when compared to the uncertain times seen in the first quarter of 2014. Ashutosh Limaye, the national director at commercial real estate Agency in India said that, the market spirit was really low in the first quarter of 2014, but after the general elections in May 2014, the market sentiment started improving gradually, taking the example of Mumbai which witnessed 65% rise in average deal sizes between Q2 2014 and Q2 2015.

Good time for commercial real estate

  • Limaye said that, the good days for commercial real estate are returning, and the number of transactions is increasing in all the major cities. Pune is leading with an impressive 89% year-on-year growth in the transacted space per deal, followed by Bengaluru (78%) and Chennai (67%).
  • He also said that, occupiers are not just leasing the larger office spaces, but are also expecting the space to be on the same floor, because of which the developers are constructing bigger floor plates.

Residential real estate seems to be sinking

  • This being the condition of commercial real estate, the residential developers are under high pressure and are owing to slow-moving sales and cash flow issues in the same cities. So, in order to keep the residential prices in a favourable range, the developers are building smaller apartments instead of lowering the price across major cities.
  • In 2015, apart from marketing tactics like on-spot discounts and flexible payment schemes, it’s been noticed that size of apartments is falling across the major cities in India. Mumbai stands first in the list of cities that witnessed largest fall in apartment sizes (5%), followed by Bengaluru, Chennai and Pune with 4%, 4% and 1% respectively.
  • According to commercial real estateagency in India, the fall of apartment sizes in Mumbai from 2010 to present has been 26%. And for the same period, Bengaluru registered a fall of about 23.7%, followed by Chennai (22.7%) and Pune (7%). Average unit sizes in Chennai and Pune have been the lowest among all the four cities.

While the configuration remains the same (2 BHK), the developers have reduced the size and have made it more compact. The possible reason for developers reducing the size of apartments might be to better suit the lower spending power of buyers. Also, the urban buyers these days are willing to live in smaller sized homes that are near to their offices. They prefer to live in a compact house that is equipped with all the basic amenities instead of spending hours of time in traveling.

The developers can think of changing the apartment sizes prior to the completion of foundation without any hassles, as price correction is market-driven. This can definitely be a good move for developers, as they will be able to reduce the price and keep the configuration unchanged.