The IT capital of India has only 3% vacancy in office space, an all-time low, against the top seven cities in the country as strong demand from corporates sucks up space but builders are moving to pre-fabricated buildings and customised offices to stay in business.
According to JLL, the average vacancy in commercial real estate stands at 15%, as of the second quarter of 2016. Bengaluru is followed by other IT hubs like Pune and Hyderabad having vacancy levels of 6% and 9%, respectively . Chennai comes next at around 12%, Kolkata and Mumbai at around 19% and Delhi-NCR at almost 32% vacancy levels. “Bengaluru continues to see a good supply-demand equilibrium compared to some other markets in the country . Any new supply that has been made available by them to the occupiers here has been taken up quickly by the latter,“ said Ashutosh Limaye, national director research, JLL India.
In the first quarter of 2016, Bengaluru had seen the highest leasing volumes in Asia Pacific on the back of some big-ticket transactions.Though there is demand for 10 million sq ft, supply of only 8-8.5 million sq ft in non-captive office space is expected to come up by the end of 2016.
“The time to supply more quality space has, however, arrived and developers in Bengaluru need to look into addressing the existing space crunch,“ said Limaye.
The supply squeeze has made some top commercial builders in Bengaluru to advance completion of their office projects in the city and use pre-fabricated technologies to capture demand early . The prefabrication technology allows builders to finish a million sq ft office project in 12-15 months as opposed to around 20-24 months using traditional methods.
“We are seeing huge demand from corporate occupiers across sectors.The new technology helps us in faster turnaround of rental income,“ says Mike Holland, CEO, Embassy Office Parks. Builder Embassy is working on a 1.5 million sq ft building in Bengaluru that will be completed in 13.5 months.
Another Bengaluru-based builder Salarpuria Sattva plans to use pre-fabricated technology to build a 4 million sq ft commercial project in Hyderabad as a test case before rolling it out to other projects.
“The new technology is around 10% more expensive than traditional method but it cuts down construction timeline substantially ,“ said Bijay Agarwal, managing director of Salarpuria Sattva Group.
According to JLL India, in 2015, more than 10 million sq ft of office space got occupied and another 2 million sq ft of leasing was done in under-construction projects in Bengaluru. However, the city is at a risk of losing its `numero uno’ position if the pace of infrastructure upgrade is unable to keep up with changing occupiers’ demand.
Source: JLL & ET, Aug:2016