Bangalore is witnessing hectic construction activity to accommodate companies, which are rushing in to set up base in the city.
As a result, 12 million square feet of space has been absorbed in 2006. Demand has come foremost from IT/ITES companies, which continue to favour the city. Next come companies from the manufacturing sector seeking to set up their research and development establishments in the city.
Besides this, sectors such as retail, banking and finance have also staked a claim to the city's office space.
Hence there is buoyant pre-leasing activity around the new projects being announced in the off-CBD and suburban micro-markets. Perceiving the demand, office space developers have initiated construction of as much as 21 million square feet during 2006.
Of this, nearly 7 million square feet was made available till the end of the third quarter, while the balance is scheduled to be for completed by 2007 and 2008.
According to a report release by Knight Frank India, an estimated 103 million square feet of new office space is likely to hit the Indian market by 2008.
Bangalore tops the chart with 19 per cent share of this, followed by Hyderabad 15 per cent, Chennai 14 per cent, Mumbai 13 per cent, NCR 12 per cent and Pune and Kolkata 8 per cent each. The balance was accounted for by Chandigarh, Mysore, Jaipur, Indore, Nagpur, Coimbatore, Vishakhapatnam and Kochi.
According to a report by Cushman Wakefield, the vacancy rates in Bangalore continue to be below 3 per cent in all micro markets except peripheral locations like Whitefield and Electronics City where it is above 15 per cent owing to excess supply.
Pre-completion lease activity and the current Grade A supply gap have been keeping vacancy rates low in the other micro markets in the city.
The city has been undergoing a considerable change in its development profile, which has been reflected in the emergence of new growth centres.
The development of the new airport in the north has resulted in shifting the real estate focus to this quadrant. Many are trying to build land banks in this region.
These will be unlocked once the new international airport at Devanahalli nears completion. The Outer Ring Road has improved the connectivity of peripheral locations with other residential and business hubs of Bangalore.
Hence suburban and peripheral locations like Bangalore like Old Madras Road, Sarjapur-Marathahalli Ring Road, Whitefield, Sarjapur Road, Electronic City and Bannerghatta Road are doing well as IT and commercial hubs.
Though concern for infrastructure is rising in suburban and peripheral locations, the demand for real estate continues to be firm.
Almost 75 per cent of the total space leased in the city over the past one year has been in these areas.
"Office space-leasing activity is expected to rise with new supply entering the market in 2007. There is an increasing demand for larger floor plates, built-to-suit premises and quality infrastructure, which are available only in the suburbs," said Mayank Saksena of Trammell Crow Meghraj.
"Since the beginning of the year, there was speculation that Whitefield will witness a large amount of office space supply planned in 2006, and as anticipated there is an over-supply situation there. Q2 and Q3 saw a good amount of activity in this micro market, however with the amount of construction activity currently on, the over supply situation will continue to persist. Access to Whitefield is still a major issue but work to expand the railway overbridge at Martahalli has commenced," said Ram Chandnani, head of the southern India business of CB Richard Ellis India.
