The post-election optimism has percolated to office real estate market too. With substantial decline in rentals over the past one year, transaction volumes have picked up in the commercial realty market.

According to a report by CB Richard Ellis, enquiry and transaction levels have on an average shown a marginal increase over the last three months. Transactions have picked up, for instance, in Bandra Kurla Complex (BKC) and the central Mumbai areas of Lower Parel and Worli. However, vacancy levels still continue to remain high which, the report predicts, will continue to stop rentals from increasing in the near future.

For instance, as compared to the first three months of 2009, in the months of April-June vacancy levels in Nariman Point increased to 17%-18% while the rentals dipped by 14%. This was mostly because existing occupants here chose to relocate to the central Mumbai to bring down their outgoings on rentals during the recession. Similarly, rentals in central Mumbai are expected to decline further with a slew of under-construction office projects expected to bring in a supply of 3.5 million sq ft by early 2010.

Rentals have declined the most in the Andheri-Jogeswari belt by 17% owing to traffic snarls caused by the construction work for the Metro. The most affected by the slump over the last three months are IT industry hubs. The slowdown in this sector has brought down office space transaction in the areas of Malad, Powai, Thane and Navi Mumbai.

“The Union Budget did not announce any incentives for the real estate sector which would have given an impetus to industry during these times. However, the focus in infrastructure in the budget will help the real estate sector in the long run,” said Anshuman Magazine, chairman and managing director, CB Richard Ellis. He added that while transactions have improved, the movement is mostly in smaller format offices with vacancy levels still high in larger spaces.

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