The Indian office market has been a laggard over the last 6 years (CY08-CY14) with lease rentals having corrected 50% from the 2008 peak levels and remaining stagnant owing to supply significantly outpacing demand. At the same time, residential prices have more than doubled from their 2008 lows and remain sticky. As a result, developers have shied away from fresh investments in office spaces over CY12-14.
 
"With an expected economic recovery on the cards, we believe that developers with a ready portfolio of office assets (especially in Bengaluru), are in a sweet spot with demand-supply dynamics expected to turn favourable over the next two-three years," said HDFC Securities in its report.

As a result, the broking firm reiterates positive stance on Prestige Estates, Oberoi Realty and Brigade Enterprises as they have significant ready leased assets in micro-markets that have limited upcoming supply.

"Although we like DLF's office portfolio, we have a Sell rating owing to corporate governance concerns and a sluggish Gurgaon residential market. However, at a pan-India level we expect peripheral micro-markets across cities to remain under pressure with high vacancy levels of over 30%," it added.

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