Although the first quarter of the year saw a major decline in rental values in Indian commercial spaces, the process of stabilisation has begun over the past few weeks, according to a real estate consultancy.

A study by Jones Lang LaSalle Meghraj (JLLM) shows commercial rentals across all major cities reached stability after an overall downward movement in the second quarter. According to the consultancy, an absorption of between 4-5 million square feet of commercial space was witnessed in the first quarter of 2009, which was higher than the fourth quarter of 2008.

Abhishek Kiran Gupta, head of research, JLLM, told Economic Times that in Q1 there was a marked decline in commercial rental values in Mumbai and Delhi, with Kolkata, Hyderabad, Chennai and Pune following on a scale of magnitude.

"Prime areas that were seeing a fall in rental values till the start of the second quarter are beginning to display increasing constancy after a correction of between 30 and 40 per cent. If we see any further fall in rental values, it will not exceed two to four per cent until stability is attained in the next two quarters. This is a good time for negotiating and locking in good rentals."

Kaustuv Roy, Executive Director, Cushman & Wakefield India, said with commercial rental values having corrected significantly over the past 12 months, there has been some renewed interest from occupiers. "We are seeing corporate occupiers taking positive steps in concluding their space acquisitions at a faster pace," he said.

Developers feel that the correction in commercial rentals has given companies the option of moving to superior quality commercial spaces in more viable locations. That, in turn, has helped move the market in a positive direction.

"With the market finally bottoming out, enquiries have restarted and the commercial rental market is looking up," said Rajeev Rai, Vice-President (Corporate), Assotech.

 

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