» Over-supply plagues residential market
Date: Sep 12, 2008
Author: Economic Times
For those who thought the worst was over, there’s more bad news. The slowdown in the real estate sector is far from over. Rather, the worst seems to be knocking on the door, with retail and office rental prices across the country witnessing a sharp drop. In fact, current market stats reveal that there has been a drop in both retail and office rental values in the last two months which varies from 25% to 50% in some micro markets such as Gurgaon and Greater Noida, where malls and office space have seen a dip of 25-50 %, and Saket (south Delhi), where the rates have dropped by 30-35 %. Overall, the rental rates in cities such as Kolkata, Chennai, Mumbai, Pune and Bangalore have also dropped by 25-30 %.
Kishore Biyani, CEO of the Future Group, feels the rentals may see another 25-40 % drop. The market is going to witness a 25-40 % drop in the retail rentals as all big or small retailers are finding it tough to survive in this very high rental market, Mr Biyani told SundayET. “Many smalltime or vanilla retailers may have to close their shop in this kind of condition. We have changed our business model and are now operating on a revenue-sharing model in malls.
Productivity is a key factor for any retailer to operate efficiently in a mall, in case of a leased deal,” he added.
According to industry sources, initially most malls in the same micro-market had similar rental rates. But as they became operational, the rentals started to get aligned with revenues and footfalls. In the office space, the second quarter of this year witnessed a total supply of 4.3 million sq ft in the NCR region, of which 60% was for IT/ITeS but interestingly, the demand was down to 3.3 million sq ft only.
