ECONOMIC SLOWDOWN, SHRINKING OF OFFICE SPACES

In the present scenarion of economic slow down the prices of commercial real estate at almost at the almost nadir, For some bigger companies it is time for lay off and shrinking of office spaces to minimise the expenditures on the hand it is good time for smaller companies to begin the hunt for office space.Before one year many companies postponed their office expansion plans due to exorbitant cost of the commercial space. Most of the companies kept on operating from the rental accomodations since new office space was unaffordable.Now companies are preferring to own the accomodation in lieu of lowering prices and rental value even. As per sources of Tecpro Systems they were having around 16000 SqFt. office space in Gurgaon which was partly owned and rented since the rates have come down the company is planning to leave rented accomodation and go for its own. They are planning further expansion of 10000 Sq.Ft. only in Gurgaon. They also have operational office in Malad in Mumbai of around 2000 SqFt.

In the present scenarion of economic slow down the prices of commercial real estate at almost at the almost nadir, For some bigger companies it is time for lay off and shrinking of office spaces to minimise the expenditures on the hand it is good time for smaller companies to begin the hunt for office space. Before one year many companies postponed their office expansion plans due to exorbitant cost of the commercial space. Most of the companies kept on operating from the rental accomodations since new office space was unaffordable.Now companies are preferring to own the accomodation in lieu of lowering prices and rental value even. As per sources of Tecpro Systems they were having around 16000 SqFt. office space in Gurgaon which was partly owned and rented since the rates have come down the company is planning to leave rented accomodation and go for its own. They are planning further expansion of 10000 Sq.Ft. only in Gurgaon. They also have operational office in Malad in Mumbai of around 2000 SqFt..

The recent recession in real estate has given boost to the expansion plan of many propective companies with the future expansion plans. As per real estate espert KonceptsVoice this is right time for the companies to squeeze the office space and centralise the same to reduce the expenditure and at the same time companies willing to kick off expansion may go for purchase of new accomodation inspite of being on rental.The companies have to make long term approach for squeezing and expansion of the space.So it is right opprtunity for many smaller Indian firms, for whom high rentals had been a stumbling block to expansion when the going was good, this maybe the right time to buy ffice space. There has been sharp blow to the rental and capital value of commercial office space all over the Indian and most expensive locations have been on the ground in comparision to year ago. Some areas showing artificial growth and exorbitant prices have been affected worse than others. According to Koncept Voice at various locations in Mumbai the trend of down turn is like Lower Parel is down 42%, Worli is down 35% and Andheri is down by 40%; In the Delhi NCR, Gurgaon is down 30%, Noida is 25% lower and Jasola, an emerging business district, is down 30%. Even capital value of office space is down 15-25% on an average.

The question is whether this is the rock bottom trend or there is possibility of further correction? What is the advice to the prospective buyer of office space. This is also a good opportunity for companies to sale of the space they had rented out during the peak of the real estate boom if satisfied with the price being offered. Many companies on the other hands are just converting rented accomodation into owned by purchasing the same. Many are even going to financial institutions and comparing the rent with the EMI and feeling good by creating extra asset for the company.

“There is an opportunity today to lease or purchase potential location spaces at very reasonable prices in Delhi NCR and Many small and medium companies are now looking at option of taking up small spaces and are even open to purchase options,” For a number of years now, small and medium companies did not have the capacity to buy or even lease these high potential location spaces because of the constrains of high rentals,capital values and even maintenance costs in such areas. Also, developers and owners of spaces were reluctant to lease or sell smaller spaces, as there was enough demand for larger spaces in the market. Today the demand of very big office space is almost negligible and prospects are also grim. One year back Landlords were asking for very high prices now they are also becoming more flexible when it comes to lease and sale payment terms also. Having feel of the market sentiments builders are also reducing security deposits and ready to go for higher period of lease.

Many of exisitng deals have been under renegotiations of the rental amout abd owners seems to be compromising with the fear of loosing the existing tenants. The chaces of getting new tenants soon is also tough in present scenarion. This is the best time to bargain against property. A msjor travel portal Yatra.com had put its retail store expansion on hold because of the exorbitant rentals as well as the general economic slowdown. “Now the lower rentals and capital values are acting as a trigger to plan expansion if further 4-5 cities with the office space of 1000-1500 SqFt. The Jasola newly dveloped commercial location in the south Delhi is facing the downward of around 25% and enquiries are also very low in comparison to last year. Even demand and enquiries were very high during the construction of buildings as per realty experts. The so called stimulus fund worth Rs.1,600 crore out of the total Rs 4,000 crore offered by the government for refinancing housing finance companies is still lying unutilized with the National Housing Bank it has not yet found any taker. It seems that real estate market has collapsed from the artificial demand created by the investors and real estate companies doing hunting of high end buyers of luxury projects in the range of 1-5Crores.The prices of the properties had gone very high in cities like Delhi, Noida, Mumbai, Puna, Hyderabad and growth was around 100% in last 2 to 3 years. Now the question is whether the prices will come down further? Is It right time to hit the deal,or to wait and watch for some time?