As India’s technology sector expands its horizons, Bengaluru has emerged as a dominant growth frontier offering the country’s new economy sectors such as information technology, biotechnology, aerospace, research and development, clean energy, among others, trending a new growth paradigm. The city has led the country’s corporate real estate market among leading cities over the last five years in terms of office space stock as well as office space absorption trends.
Sustained demand for office space has consistently driven commercial real estate growth in the city that crossed a milestone in mid-2013. Bengaluru has become the first Indian office hub to join the Global club for 100 million Sq ft office markets. The city’s successful corporate space has been primarily driven by political stability over the years. Another factor is the country’s largest expatriate population, and availability of top talent for business.
Till now, corporate occupiers have been focused on the Outer Ring Road (ORR) stretch between Marathahalli and Sarjapur road. This part of Bengaluru, East Bengaluru, consists of a lot of IT companies and offices, as well as residential spaces, schools and shopping malls. ITPL with its host of leading software companies, offices such as SAP are all located this side of town. Surging with activity, the area is becoming more prone to severe traffic bottlenecks, as well as a huge increase in prices of office spaces in and around this region. This is resulting in East Bengaluru becoming less attractive for new office projects to set up base.
With increased demand for office supply and restricted launches, the overall supply for the same has witnessed a sharp fall. While the total demand is pegged at around 10 million square feet, the projected available office space is only around 8.5 million square feet. Around 4 million Sq ft of office space was leased out in early 2016, as compared to 7.2 million Sq ft being leased out the previous year. Demand was mainly driven by IT companies.
ORR continues to be the more sought after business district among all zones accounting for almost 45 per cent of the total transacted space. But since demand has outpaced supply here, rental values have also been impacted. Rental values for office space in ORR has seen a 16 per cent hike compared to 2015.
Going forward, a lot of potential is to be seen in North Bengaluru in terms of an increase in office space. North Bengaluru consists of Hebbal, Yelahanka, Sahakarnagar and surrounding areas. Because of the infrastructure initiatives in various stages of construction and planning, including the proposed high speed rail link, the Hebbal – Yelehanka expressway, the elevated expressway to the Bengaluru International Airport (BIAL) and the advent of the monorail, North Bengaluru is slowly becoming the most lucrative investment option.
Suresh Hari, Vice President CREDAI – Bengaluru says, “Given the crowding of East Bengaluru, migration is inevitable, but this will not lead to a shift in activity rather an expansion of activity. Whitefield and surrounding areas will continue to thrive given the large amount of commercial and residential spaces prevailing there.”
Adding to this, CEO – Retail and Commercial of Brigade Group says, “North is witnessing a great demand given the better infrastructure in terms of roads, connectivity, proximity to the airport and less congestion but this social infrastructure is merely inviting new developments and not exactly causing a shift in activity.”
The land parcels are also cheaper in North Bengaluru as compared to the East, and the water supply, which had been a bone of contention so far in the area, has improved drastically after the laying of new water pipe lines by BSSWB. Lease rents too are far more attractive in the North, resulting in the increase in residential developments around the office clusters, added Mr. Mirchandani.
Secretary, CREDAI – Bengaluru, Adarsh Narahari says to this accord, “The concept of shifting does not arise. Whitefield and surrounding areas will continue to remain as the major hub of activity. But what will be seen is an expansion of activity to areas such as the North, especially for new larger office spaces. Bengaluru leads India in office space developments, and thus it is only natural for new spaces to emerge in the city”.