Commercial Rentals Go Up.

Office Space rentals have gone up substantially in the central and suburban business districts of Delhi (CBD and SBD), including places like Connaught circus and Nehru Place, in recent times.

Although the residential segment in NCR (National Capital Region) has taken a breather or even seen marginal corrections, the office space markets continue to show upward movement. With demand outstripping supply, both rentals and capital value rose during the first quarter of 2007.

There have been some fall in rentals in the satellite towns and these are mainly attributed to over supply of office space and the impending development of a new SBD at Jasola in Delhi itself.

With regarded to the absorption of commercial office space, a DTZ India report states that about 1.9 million sq.ft of such area came to be occupied in Delhi/ NCR from January to March this year, with the IT-ITES Sector alone accounting for 65%- 70% of the utilization.

The rentals have continued to increase due to steady demand generated by expansion plans of companies in NCR and shortage of space. These have increased by 7% -8% q-o-q (quarter on quarter) and by 50% - 80% y-o-y(year-on-year)in CBD. The quoted rentals in SBD have witnessed

a considerable rises of about 15% - 20% q-o-q and 50%-70% y-o-y.

However in the exceptional case the quoted rentals also touched INR 325 per sq.ft. for a building in SDB region (Nehru Place). The rentals in Gurgaon prevailing at about INR 100 per sq.ft pm has increased by 20% q-o-q and about 100% y-o-y in select Grade A buildings due to short fall in immediate supply. The rental values in Noida have remained stable q-o-q at INR 40-50per sq.ft pm but have increased by 30%-40% y-o-y.

Limited supply in CDB and high absorption in Gurgaon has resulted in low vacancy levels of 3% in these areas. Vacancy rates in SBD have also decreased to 6% due to continued demand for office

Space. However, Noida experienced high vacancy rates of about 16% due to large office supply that has entered the market during the last year.

Limited new supply has been added in NCR region. DLF building 8 C (795,000 sq.ft) in Gurgaon was the only addition to stock in the last quarter. Approximately 16 million sq.ft supply (including vacant stock) is expected to come in to NCR in 2007. DLF tower in Jascola (700,000sq.ft ), Unitech Info Space-bulding-3 (500,000sq.ft) and DLF Building 9 A(745,000 sq.ft) in Gurgaon and Corenthum (500,000sq.ft) in Noida are expected to be available by Q3/ Q4 2007.

Additional, Jasola (in south Delhi) is likely to see the development of slightly over two million sq.ft of office space, almost 75% of which is already booked. The prominent firms contributing to the office space include DLF (7 lakh sq.ft of property), TDI (1.5 lakh sq.ft) and Omaxe (1.5 lakh sq.ft).

Of the total supply estimated in NCR for 2007, 5.6million sq.ft is expected to come up in Noida,

Adds DTZ India. This is far in excess of the projected absorption of 3.3 million sq.ft and may see rentals decline or, at best, remain stable. But with continued demand and limited fresh supply, office space rentals in CBD and SBD are expected to continue their upward movement.