the intelligent bangalorean's must-read weekly

Talk is in transition. For now, our weekly in print has ceased publication. We will update you about our enhanced web initiative very soon. Thank you for your support.

Top firms hunt for good office space, South east Blore set for more growth

Friday, 26 July 2013 14:52 Written by 

Rate this item
(1 Vote)

real estates

Office space: RMZ has a spacious office setting on the Outer Ring Road close to Bellandur

Post June, demand for office space has gone up in Bangalore with atleast two million square feet likely to be absorbed in the immediate future. It means jobs haven’t completely disappeared and real estate developers may have a good time

 

Demand for office space in Bangalore has picked up sharply post June after a sluggish first six months of 2013. The demand is sharpest in South east Bangalore comprising the Sarjapur-Marathhalli corridor, followed by Whitefield, and then Bangalore North. Sanjay Dutt, Executive Managing Director, South Asia, Cushman and Wakefield real estate consultancy said: “Based on expected recovery of the economy, partly due to global recovery, but largely due to the positive signals being sent out by the Central Government to promote business investments, office space demand is expected to witness a positive growth of 10% in 2013 and 20% in 2014.”

 

The new demand for office space in Bangalore is led by the Arizona-head-quartered software major, JDA Software Company, Paris headquartered investment group, AXA, the Hertfordshire-based British retail giant, Tesco and the Washington D.C. based asset management company, The Carlyle Group. The companies are looking for space in the range of 200,000-250,000 sq feet in the Sarjapur-Marathhalli corridor and Whitefield, according to Cushman and Wakefield. This demand is touching the one million square feet mark. Real estate consultancy Jones Lang Lasalle also told Talk that office space is also being sought at the RMZ Eco World or Adarsh Tech Park and Pritech Park in the Sarjapur –Marathhalli corridor, at Prestige Tech Park near Mahadevapura, and at Manyata Tech Park near Hebbal. The projected demand in these four tech parks is estimated at one million square meet. The entire demand post June in Bangalore is touching nearly two million square feet.

 

A Cushman and Wakefield representative told Talk: “Nearly forty to fifty per cent of the demand will be and has been in Bangalore south and south east - Sarjapur-Marathhalli corridor and 30-40 per cent in Whitefield. The rest forms Bangalore North – primarily Hebbal and BIA road; and Bangalore West, which is negligible. Bangalore North is seeing individual companies making choices, not like in South East and East Bangalore where it is a generic industry trend. This has been the trend for the last three years and has continued in the second half of 2013. ” Why are these two regions growing rapidly and why is Bangalore West lagging? The representative says: “Connectivity in the south and south east Bangalore and to all of east from South is far better than anywhere else. The quality of office spaces being offered in these regions is also better than any other region of Bangalore. The maximum number of tech companies and what little of banking and financial companies are present in Bangalore are located here. So people can transact easy. Bangalore west lags because it is too far from Bangalore south, south east and east even though now the Nice corridor offers some relief. But Bangalore west is still too far out in terms of geographical reach.”

 

The hope for Bangalore west, says the analyst, is the Global Village Tech Park, which is located off Mysore road after the RVCE campus. “There are more than five tech companies located in the park. Accenture will be the biggest name coming in the second half of this year. That may generate interest in Bangalore west. The Nice corridor is the only exit for Bangalore west, while the main Bangalore-Mysore expressway merges into a congested road heading towards Bangalore city. This infrastructure bottleneck is also the reason the region lags.” As for Bangalore North, the airport is the leading attraction. The trend has been for individual companies to locate here. Once the connectivity is better after the metro reaches the airport, growth may be higher in the region, says the analyst.

 

“The overall picture for 2013 is that the first half has been subdued. Within the first half, the first quarter was good, while the second quarter was bad. The third quarter is now picking up sharply and we find many enquiries coming in for office space. So far about three and a half to four million square feet has been taken up in the first five months and we expect another four to six million square feet to be taken up in the second half. Why we say this is good is, the trend in the second half of 2012 and first half of 2013 was moderate – less than four million square feet had been taken up for office space,” says the Cushman and Wakefield analyst. What larger trend does the higher demand for office space in Bangalore imply? Sanjay Dutt, Executive Managing Director, South Asia, Cushman and Wakefield real estate consultancy says: "A number of factors act as catalyst for the growth and sustenance of office demand such as improvements in infrastructure, connectivity and the quality of office space supply. Additionally, more and more companies are looking at rationalizing their real estate portfolio by relocating and/or consolidating their wide-spread operations, besides actually growing their businesses. This is expected to lead to an increase in leasing activities and also add to the net absorption. Bangalore is expected to witness lower demand-supply gap.”

 

The heightened increase in office space is also indicative of healthy performance of the economy and more jobs. The Cushman and Wakefield analyst explains: “Typically buying more office space means higher head count and more seats. Relocation of enterprise is not the only reason. Hiring will typically go up. It means there is anticipation of a good number of projects, good revenue and sustainability of business. No expansion is undertaken without anticipation of improved performance and productivity. Maximum office space expansion is by tech companies – almost to the tune of 60-70 per cent and since head count is high there, you can expect more jobs. Even financial companies need plenty analysts and they’ll look out for specialists. Overall it is a good sign for the local Bangalore economy, jobs and market.” Excepting in a case or two, office space expansion in Bangalore in the last three years is accompanied by increased hiring. Infosys has been for very long saying that space at Electronic city is exhausted and that’s why the new Sarjapur campus, expected to be as big as if not bigger than the original Electronic city one. Wipro too is expanding in the Sarjapur area. Accenture will be having more people at its Mysore road Global Village Tech Park. The leasing and land purchase by these companies have already been completed and occupation of space and commencement of work has to take off.

 

Global technology firm Honeywell Technology Solutions signed up a million sq ft of office space in Bangalore in RMZ’s special economic zone, RMZ Ecoworld (also known as Adarsh Tech Park, between Sarjapur and Marthhalli) in April 2013, making it the second-biggest office leasing deal in the country after Goldman Sachs signed up 1.6 million sq ft in the city in 2012. The first deal is a relocation and growth strategy by Honeywell as it wanted to move out of its office at Kalyani Tech Park in south Bangalore in view of the upcoming metro rail work there. The deal is a staggered one – it will pick up 200,000-250,000 sq feet in four phases. “As we continue to be locally invested, we were looking at efficiencies and co-location synergies to enable better optimisation and productivity opportunities,” a spokesperson had explained the deal. The second one is on the Sarjapur Outer Ring Road in which Goldman Sachs will take up one million square feet in the first phase and 600,000 sq feet in the second phase. A spokesperson had said then: “This new lease is...to consolidate our presence and to accommodate future growth in the country.” Earlier in 2011, Accenture had signed up 1 million square feet deal for presence in the Global Village Tech Park, Mysore road. Accenture will occupy the space in phases.

 

The projection for the next five years in office space supply in a study conducted by Cushman and Wakefield in association with Global Real Estate Institute is 180 million square foot across eight Indian cities: Delhi, Mumbai, Bangalore, Ahmedabad, Pune, Chennai, Kolkata and Hyderabad. The highest demand/absorption will be recorded in Mumbai with an estimated 44 million square feet (msf), followed by Bengaluru (31 msf) and NCR Delhi (27.8 msf). The top three cities will constitute approximately 57% of the total office space demand. Ahmedabad will record the lowest office demand of approximately 7.8 msf in the next five years, while Kolkata will be finish one but last with demand of 8.4 msf. In terms of creation or supply of office space, Mumbai is expected to see the highest supply in the next five years with an estimated 52.6 msf of fresh office space supply followed by NCR Delhi (43.8 msf) and then by Bangalore (31msf). Bangalore is expected to have to lowest demand - supply gap with supply exceeding by less than 1%, while Kolkata will have the highest gap 64% with supply exceeding demand. NCR and Mumbai will also experience a high demand - supply gap of 57% and 19% respectively, where supply will exceed demand. Chennai and Pune are among the cities to see lower demand - supply gap with supply only exceeding by 2% and 4% respectively. Bangalore has witnessed the highest absorption during 2011 at 11 million square feet after three years of recession after-effects. Between 2008 and 2010, the average absorption was around 8-9 million square feet. Companies became bolder once economy stabilised and went in for a high purchase in 2011. In 2012, the office space absorption settled down to the average absorption levels in Bangalore of 8-9 million square feet as the economy stabilised to its normal growth levels, and by the end of 2013, it is expected to touch the same mark or a million square feet more indicating continued stability. The IT/ITES sector exhibited lower demand for office space in 2012, one of the reasons for lower demand for office space in that year, while in the second half of 2013, the demand for office space is picking up with IT/ITES and financial companies showing interest. This in turn is a result of increase in the number of projects offered by US and European companies which necessitates expansion. If this had not happened, demand was expected to go down lower than the first half of 2013 and second half of 2012. Bangalore in the next five years is likely to have the lowest demand supply gap due to steady supply additions and absorption levels.

 


OFFICE SPACE DEMAND

 

IT-ITES sector accounts for 60-80 per cent of office space demand

 

Banking and finance sectors account for around 10 per cent

 

Manufacturing and allied sectors around 10 per cent

 

Small scale industry forms the rest

 


WHY DEMAND FOR OFFICE SPACE IS INCREASING

 

Availability of quality human capital

 

Improving social and civic amenities

 

Availability of quality office space options

 


AREAS IN DEMAND

 

Sarjapur-Marathhalli ORR

 

Hebbal-BIA road

 

Whitefield

 


BANGALORE’S BIGGEST OFFICE SPACE DEALS SO FAR

 

Accenture – 1 million square feet in 2011

 

Goldman Sachs – 1.6 million square feet in 2012

 

Honeywell – 1 million square feet in 2013

 


BANGALORE’S OFFICE SPACE GROWTH TRENDS

 

2008-10 – 8-9 million square feet

 

2011 – 11 million square feet

 

2012 – 9 million square feet

 

2013 expected – 9-10 million square feet

 


COMPANIES LOOKING FOR OFFICE SPACE

 

JDA Software Company

 

Accenture

 

Tesco

 

Axa

 

The Carlyle Group

Read 42730 times

Leave your comments

0
terms and condition.
  • No comments found

  • Popular
  • Latest
  • Comments
  • Tags