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India office demand growing, tenants seek favourable terms

In a survey conducted by property services firm DTZ, nearly half of occupiers said they were seeking more office space but landlords should expect to be asked for more favourable lease terms.

The demand for office space in India is still growing despite the global economic downturn but occupiers are expecting more favourable lease terms, according to a report by DTZ.

In its Survey of Corporate Real Estate Heads, the property services firm said that 46 percent of respondents from across Delhi, Mumbai and Bangalore, expected to expand their real estate space, while only 25 percent said they would contract their office space needs. The remaining 29 percent were neither expanding nor contracting.

But despite nearly half of the 48 companies polled in the survey looking to grow, DTZ said that more and more occupiers would “petition for better terms in lease deeds”. The firm said that items such as reduced lock-in periods and security deposits would become increasingly demanded as tenants respond to the more challenging market environment. DTZ said such factors would likely lead to a fall in rental levels.

The firm said that 70 percent of the occupiers polled planed to negotiate a reduction of between 10-15 percent on their current base rents.

DTZ also said as more occupiers look to grow their office space needs, the quality of the developments needed to house them would grow offering investors “value adds propositions”.