BANGALORE: With its landlocked area, competitive property rentals and infrastructure initiatives, Bangalore is an attractive destination for occupiers. While the Peripheral Business Districts (PBDs) of Outer Ring Road (ORR) and Whitefield have been performing well, more recently, north-east and north Bangalore have come into prominence.
Factors driving demand
Areas along the ORR, given the benefit of connectivity and presence of ample completed and under-construction residential catchments along it, are witnessing maximum traction in the office space segment. Availability of quality spaces at competitive rentals, and presence of good civic and social infrastructure has made ORR a preferred option for many companies. Bangalore north is emerging as a preferred location due to its proximity to the airport and is connected well by the ORR to other areas of the city.
Naveen Nandwani, Executive Director, Cushman & Wakefield, explains, “Presence of international schools, hospitals, upcoming social infrastructure, ongoing infrastructure initiatives such as the Hebbal-airport expressway, developing residential catchments and present/upcoming quality office space supply are factors leading to the emergence of north Bangalore.”
SEZs in the forefront
The ‘India Office Market View Report-Q4 2013′ by CBRE states that commercial leasing activity picked up in the PBD of Whitefield and Electronics City in the fourth quarter of 2013, with around 0.69 million sqft of office space being added to the existing stock in the Whitefield region.
Ram Chandnani, Deputy Managing Director, CBRE South Asia, elaborates, “Owing to persistent demand from corporate occupiers, the Sarjapur-ORR belt observed healthy absorption. On the supply side, this micro-market witnessed supply addition of around 1.20 million sqft. Owing to healthy demand-supply dynamics, this micro-market continues to remain a growth corridor. North Bangalore continued to witness significant occupier interest as around 0.82 million sqft of Special Economic Zone (SEZ) space was transacted in this micro-market. Significant supply addition over the next few months is likely to spur transaction activity here.”
CBRE Research indicates that transaction activity was led by Bangalore in the fourth quarter of 2013, with SEZ space garnering occupier interest with the city witnessing large commitments. Going forward, transaction activity will continue to appreciate along the ORR stretch owing to infusion of fresh Grade A commercial and SEZ space over the forthcoming quarters.
Ram adds, “Also, the north and south Bangalore markets are likely to witness an increase in demand for office space. The city’s supply pipeline is dominated by a healthy mix of commercial and large SEZ developments, which should continue to drive demand for SEZ as well as non-SEZ space. Rental values are expected to maintain stability across all micro-markets barring the ORR, Whitefield and north Bangalore where upcoming supply and occupier interest will define market dynamics in the short to medium terms.”
Availability and absorption
Statistics with Cushman & Wakefield state that the total leasing activity in the city was recorded at approximately 8.50 million sqft, similar to 2012. However, the total leasing comprised net absorption recorded at over 4.50 million sqft and the rest was for relocation and/or consolidation activities.
Naveen explains, “The net absorption was relatively low given the prevailing market conditions, which forced companies to be cautious with their expansion plans. In an increasing trend, occupiers, primarily belonging to IT-ITeS sector, used the opportunity to consolidate their operations in order to gain operational efficiency. Around 92 percent of the total net absorption took place in Grade A properties. Meanwhile, the city witnessed around 5.80 million sqft of supply of which close to 90 percent constituted of Grade A spaces. The higher percentage of Grade A absorption and supply reflected clear preference for quality spaces.”