The current global slowdown, which has forced multinationals to consolidate their overseas operations, has resulted in a significant decline in the absorption level of office space in the country.
On an average, the absorption of office space during H1 of 2012 declined 32 per cent, experts say.
"The main reason is the global slowdown and the still lingering eurozone uncertainty. This has forced multinationals to consolidate their operations here. As a result, there was very little activity in the sectors which largely attract international firms," CBRE South Asia chairman and managing director Anshuman Magazine told PTI.
According to global real estate adviser DTZ, only 13.3 million sqft of office space was absorbed in H1 against 19.7 million sqft in the same period last year.
DTZ chief executive Anshul Jain said there is a direct correlation between economic performance and the demand for commercial office space. The domestic economy is facing difficulties on several fronts.
"Fall in take-up is largely due to the cautious stance adopted by the key IT/ITeS and BFSI sectors, since their order books have taken a hit," Jain added.
Besides the fall in demand for office space, a slowing supply addition in the January-June period resulted in reduction in absorption across cities, Jones Lang LaSalle research head Ashutosh Limaye said, adding that market saw a steep 52 per cent decline in fresh supply during the period.
"Slowing supply addition in the first half compared to the year-ago period is one of the reasons for slowing absorption across cities," Limaye said, adding that poor sentiment is likely to continue in the second half.
"We are not seeing much activity happening in the segment even in the second half. We will not see as much absorption as we saw in 2011.
"Though we expect better performance in the July-December period compared to H1, we expect the absorption level to decline nearly 15 per cent from the 2011 levels," he added.