Despite the real-estate market turning bullish post-Covid, developers who have built commercial office spaces continue to battle vacancy levels as high as 45 per cent.
According to a recent report by global consultants Knight Frank India, the vacancy levels in Ahmedabad are the highest in the country among big cities.
In the second half of the calendar year 2019, about 36 per cent of the office spaces in Ahmedabad were vacant. This vacancy went up to 45 per cent in the second half of 2020 and continued to remain stagnant despite the increased sales in the commercial segment.
According to the report, Ahmedabad witnessed a 1.3 million square feet (0.1 million square metre) of transactions between January and July 2022. This was a 202 per cent growth when compared to the transaction volumes during the same period in 2021.
However, the high quantum of sales got negated as an equal 1.3 million square feet of new office space got completed in the first six months of 2022.
“The high vacancy levels continue to put pressure on rent. The rate at which new office spaces have been coming online will need to continue to reduce, or the market will be hard-pressed to maintain equilibrium,” the report states.
When compared to other cities, the vacancy in office spaces is highest in Ahmedabad. Apart from Kolkata, which had a 42.5 per cent vacancy in the first six months of 2022, cities such as Bengaluru (12%), Chennai (14%), Hyderabad (14%), Mumbai (20%), NCR (14%) and Pune (12%) had less vacant office spaces compared to Ahmedabad.
“The vacancies have not come down because of the influx of new office spaces. But in the coming months, the quantum of office space being built in Ahmedabad is expected to be limited as the residential segment is becoming more attractive for real estate developers,” said Balbir Singh Khalsa, executive director of Knight Frank India.
The rents in areas like Ashram Road, Ellisbridge and Paldi fell marginally in the past one year, while rentals of properties on Bodakdev, Keshav Baugh, Prahlad Nagar, Satellite, SG Highway and Thaltej saw no change.
Of the 1.3 million square feet area transacted during the first half of 2022, Ahmedabad saw co-working sector companies taking up 0.25 million square feet, which is 20 per cent of the total area transacted. Manufacturing accounted for 23 per cent of the total space, while Information Technology and BFSI firms took up 18 and 16 per cent of the space respectively.