BANGALORE: The IT revolution in Bangalore took off mainly due to the availability of large tracts of land at favourable rates, sizeable talent pool and the pleasant weather. This has led to a rise in commercial realty spaces in key locations around the city with high absorption rates.
According to a report by Vestian Global Workplace Solutions, there is a stock of 112 million sqft of office space in Bangalore with an eight percent year-on-year growth in absorption. In the third quarter of 2013, out of a total supply of 4.72 million sqft added by Mumbai, Bangalore, Hyderabad and Chennai, Bangalore emerged as the leading contributor with 3.16 million sqft of fresh supply of office space and witnessed 50 percent increase as compared to the previous quarter. It also accounted for the highest absorption at 2.05 million sqft followed by Mumbai at 1.01 million sqft.
Naveen Nandwani, Executive Director, Cushman & Wakefield, elaborates, “Considering the IT interest in Bangalore, the city has always had the highest office space demand, recording an average leasing of close to nine million sqft over the last few years. The availability of skilled manpower, stable political environment, increasing homegrown IT-ITeS companies and ongoing infrastructure initiatives continue to reinforce Bangalore as an attractive IT-ITeS destination. Higher demand from IT-ITeS sector companies, adequate supply of commercial space and competitive rentals have provided impetus to occupiers’ preference for the city.”
Locations and options in commercial property
The IT-ITeS sector continued to be the key demand driver accounting for almost 62 percent of the take-up. Other sectors such as manufacturing and consulting account for 11 and 10 percent respectively of the takeup each. Naveen says, “Outer Ring Road (ORR) and Whitefield were the most active commercial markets last year, recording 46 and 30 percent of the total net absorption respectively. This was mainly due to the availability of quality space options at competitive rentals, proximity to residential catchments and good support infrastructure. Out of total pre-commitments of 2.40 million sqft in 2013, over 77 percent were concentrated around the peripheral locations of the ORR.”
Shrinivas Rao, CEO – Asia Pacific, Vestian Global, says, “For the coming three years, the ORR is expected to remain a preferred destination among IT/ITeS occupiers. The micromarket has witnessed substantial activity in the past three years and is expected to continue the trend with significant planned supply. With companies initiating development of their campuses in Bangalore north, this micro-market is anticipated to gain momentum by 2015.”
Commercial property outlook
Bangalore is expected to continue witnessing the highest demand for commercial property in the country and 2014 is crucial in terms of political and economic scenario as India holds its general elections that would impact the course of development running up to 2020. Naveen analyses, “The first quarter of 2014 is anticipated to witness some sizeable transaction activity – a result of some spillovers from the current year. Considering the amount of Request for Proposals (RFPs) in the market, next year is anticipated to witness healthy levels of transaction activity with majority of the demand expected to be stemming from the IT-ITeS companies. The peripheral submarket of the ORR will continue to remain the preferred occupier destination, considering the concentration of pre-commitments in this location during the year”.