The year 2010 began on a positive note for commercial real estate sector, with take-up improving across the majority of markets. The average deal size has increased, with several IT/ITES occupiers taking large amounts of space. The termination of tax benefi ts to STPI units under the Union Budge 2010-11 is likely to result in increased demand for space within IT/ITES SEZs.

The movement of occupiers out of CBDs to more cost effective PBD regions, along with the rationalisation of space, continued in Q1 2010, although the number of such moves have declined and are likely to go down further this year as the business outlook improves.

Vacancy levels continued to rise across various micro-markets in Q1 2010, as large unabsorbed supply entered the market. With limited new project launches and developers being cautious about reviving postponed projects, future new supply should be more in tune with market demand, resulting in a deceleration in vacancy growth by next quarter.

The convergence of supply and demand in some markets (which have low land availability for new development, or where developers have rationalized new supply in the wake of the slowdown) resulted in signs of rental revival towards the end of the quarter. This trend is likely to extend to newer areas and could result in a price appreciation in most of the key Indian cities by Q2 2010.