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Bangalore tops in office space absorption for Q1 2011
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siliconindia
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Thursday, April 14, 2011
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Bangalore: The first quarter of 2011 witnessed almost 6 million sq.ft. (20% increase vis-a-vis Q1, 2010) of office space being absorbed across the key markets in India, reveals a CB Richard Ellis report.
According to CB Richard Ellis India's latest report titled 'India Office Market View - Q 1, 2011', Bangalore accounts for almost 36 percent (more than 2 million sq.ft.) of total space being absorbed followed by NCR at 27 percent (more than 1.6 million sq.ft.). During 2010, a total of approximately 32 million sq.ft. of space was absorbed across key markets. The report also reviews rentals for Grade A office space across 7 cities namely Delhi NCR, Mumbai, Bangalore, Chennai, Hyderabad, Pune and Kolkata.
According to Anshuman Magazine, Managing Director, CB Richards Ellis, "The office market across India continues to grow as is evident from the findings of our report. With corporates renewing their expansion plans across most industry sectors; both demand levels and transaction velocity are expected to remain buoyant in the near to mid-term. However with the significant supply in the market, rentals are expected to remain under pressure except for Grade A office space in few key micro markets."
The rental values for grade A office space largely remained stable across most non-CBD and suburban micro-markets. Whilst demand levels have been positive, the large supply pipeline and ready availability of quality space has negated any undue price enhancement. In some micro markets, high vacancy levels could contribute to development of some downward pressure on values in the short to medium term. Values in the Central Business District locations in Delhi, Pune, Kolkata and Hyderabad remained stable, whilst those in Bangalore and Chennai witnessed enhancement.
Some of the major rental trends as per the findings are:
1. In the NCR region, the Central Business District (CBD) of Connaught Place and the Secondary Business District of Nehru Place and Jasola continued to generate interest from occupiers with an estimated 1,25,000 sq ft office space being absorbed. Gurgaon witnessed the addition of around 0.85 million sq ft of fresh IT space and approximately 0.47 million sq ft of non-IT space. The transaction activity in Noida remained low as compared to the previous quarter. The overall leasing activity in the Delhi NCR region is expected to remain buoyant, however supply pressures will result in limiting any substantial appreciation in values, especially in the peripheral markets of Gurgaon and Noida.
2. In Mumbai, the CBD of Nariman Point witnessed limited activity, while the Extended Business District of Lower Parel saw availability of around 0.35 million sq ft of IT space. The Western Express Highway observed absorption of almost 100,000 sq ft. Overall trend in the market is towards rentals firming up on account of enhanced demand levels and transaction velocity.
3. CBD of MG Road, Richmond Road, Residency Road and Lavelle Road in Bangalore witnessed an increase in number of enquiries from corporate houses preferring to expand within the CBD. Additionally, due to increase in demand and limited availability of Grade A supply or expected to be made available during the current year, rental values increased by almost 15 percent on a q-o-q basis. Most companies have plans to relocate to peripheral markets of Outer Ring Road (ORR) and Whitefield. Rental values are expected to maintain an upward trend due to increase in demand and lack of availability of quality space in the prime city. The suburbs are also expected to witness an increase in transaction volume with proposed expansion by various corporate occupiers opting for more cost effective suburban Grade A space.
4. In Chennai, the CBD encompassing areas of Anna Salai, T Nagar, RK Salai, Alwarpet and Nungambakkam did not witness new supply addition in the first quarter, however a few projects are lined up for completion in the second quarter of 2011. The Chennai market witnessed absorption of approximately 0.5 million sq ft in Q1 2011.
5. In Hyderabad, the first quarter of 2011 witnessed a significant increase in demand for office space in the city, driven by the expansion requirements of some of the larger IT/ITES occupants. This increase in demand coupled with limited ready supply led to an appreciation in rental values across micro-markets.
6. In Kolkata, the CBD of Chowringhee, B.B.D.Bag, Park Street and Camac Street witnessed an increase in enquiry levels during this review period, however transaction closures were quite low.
Demand for office space is expected to continue to witness an increase in the secondary market, primarily due to proposed infrastructure development initiatives such as the upcoming Eastern and South-Eastern railways reservation terminal, a bus rapid transit system - a high speed exclusive bus corridor and an extension of North-South metro railways. Rental values are expected to remain stable in the coming few quarters, primarily due to the supply pipeline.
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