Bengaluru large Office Space in Short Supply as Cos Expand

Rentals up 10% in past 3 months, now growth plans take a hit.Expansion drive of large corporates is leading to a shortage of office space in top metros as rentals shoot up 10% in the past three months, hitting the growth plans of companies.

The year 2014 was characterised by several large office deals by ecommerce and IT companies across top seven cities in the country. Ecommerce giants like Snapdeal took 3,37,000 sq ft, Flipkart leased 3,35,000 sq ft and Jabong opted for 2,05,000 sq ft space across Bangalore, NCR and Mumbai.This was followed by EMC, Accenture, Sapient and Aricent occupying upward of 4,00,000 sq ft. “There is a shortage of large office spaces. If supply crunch continues, the rental will start inching up,“ said Anshuman Magazine, chairman and managing director, CBRE South Asia. “Corporates with large requirement of 100,000 sq ft and above will get impacted and may have to look for alternate locations,“ he said.

According to property advisory firm Cushman & Wakefield, 13.36 msf of commercial space was deferred at the end of 2014 in Mumbai, DelhiNCR, Pune, Chennai and Hyderabad. “Office space supply recorded a decline of 2% in the first quarter of CY2015 and was restricted to approximately 7.4 msf,“ said Sanjay Dutt, executive managing director, South Asia, Cushman & Wakefield. Bangalore-based Embassy Group said it has already leased 0.7 msf across 16 deals to corporates including Seagate, Mercedes, Rolls Royce, Flipkart and Wells Far go in the last few months. “Nobody has completed space to offer. We are completely leased out as the demand for space has firmed up,“ said firmed up,“ said Jitu Virwani, chairman and managing director, Embassy Group. Embassy is constructing 8 million square feet of office space in Bangalore that is expected to hit the market over next 24-30 months.

Bangalore-based RMZ said it has already leased 3.25 million sq ft in a business park in the city to corporates such as SAP, Morgan Stanley, ANZ and Honeywell in the past few months.

Real estate company Prestige Constructions has around 6 months to 2 years of waiting period for its clients.

Companies will be forced to look at Grade B office space due to shortage. Some corporates are opting for central business properties on shortterm basis and are paying 20% extra rent,“ said Nandakumar OP, VP & head of leasing, Prestige Constructions.

The top eight cities of India recorded overall net office space absorption of 7.9 million square feet (msf) in Q1 2015 (Jan ­Mar 2015), recording a year ­ on ­ year (y-o-y) increase of 35%. Office space absorption is expected to increase by approximately 15% by the end of 2015, according to Cushman & Wakefield.

Source : ET, April, 2015

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