What has the debt crisis in Europe and the US got to do with office space prices in India? Quite a lot, it seems. According to Jones Lang Lasalle, a real estate consultancy, nearly 50% of the demand for investment grade office space in India is contributed by the information technology (IT) and the IT services sector. And companies from this space derive a significant chunk of their revenues from the US and Europe. Thus, with both these regions struggling with high debt and recession, the reverberations have been felt in India as well. As a result, the demand for office space in India has slackened.
Besides IT companies, even firms headquartered overseas have been major drivers of the demand for office space. And with the high level of uncertainty in the global markets, these firms are now cautious on buying more office space. All of which means that demand for office space is expected to remain subdued in 2012. So, while 2009 saw around 19.6 m sq. feet of office space leased out across the top 7 cities in India, this figure soared to 31 m sq. ft in 2010. This calendar year is likely to see a modest growth to around 35-36 m sq ft. But in 2012, this number is likely to drop to around 31 m sq. ft of office space. As far as the IT sector is concerned, a deadly cocktail of recession in the developed world and heavy volatility in the rupee has made it wary of investing in office space. All in all not a very bright scenario for the real estate sector in India.
The world markets had a disappointing performance over the week. The equity markets across the globe saw their worst week in two months. Main culprit for this is that there seems to be no end and no solution for the Eurozone crisis which has dragged for so many months now. Further, Germany's inability to sell its 10 year bonds, France's deteriorating rating and Italy's rising cost of borrowing worsened the situation.
Indian stock markets witnessed a fall of nearly 4% this week. The markets were very volatile on concerns of weakening rupee, euro zone crisis and poor fundamentals. Amongst the other world markets, Germany led the losses (down by 5.3%). The German debt agency failed to find buyers for its 10-year bonds. All other markets were on the losing end too with China losing the least (down by 0.8%).
Besides IT companies, even firms headquartered overseas have been major drivers of the demand for office space. And with the high level of uncertainty in the global markets, these firms are now cautious on buying more office space. All of which means that demand for office space is expected to remain subdued in 2012. So, while 2009 saw around 19.6 m sq. feet of office space leased out across the top 7 cities in India, this figure soared to 31 m sq. ft in 2010. This calendar year is likely to see a modest growth to around 35-36 m sq ft. But in 2012, this number is likely to drop to around 31 m sq. ft of office space. As far as the IT sector is concerned, a deadly cocktail of recession in the developed world and heavy volatility in the rupee has made it wary of investing in office space. All in all not a very bright scenario for the real estate sector in India.
The world markets had a disappointing performance over the week. The equity markets across the globe saw their worst week in two months. Main culprit for this is that there seems to be no end and no solution for the Eurozone crisis which has dragged for so many months now. Further, Germany's inability to sell its 10 year bonds, France's deteriorating rating and Italy's rising cost of borrowing worsened the situation.
Indian stock markets witnessed a fall of nearly 4% this week. The markets were very volatile on concerns of weakening rupee, euro zone crisis and poor fundamentals. Amongst the other world markets, Germany led the losses (down by 5.3%). The German debt agency failed to find buyers for its 10-year bonds. All other markets were on the losing end too with China losing the least (down by 0.8%).
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