Monday, May 28, 2007

Cushman Wakefield survey of Bangalore office space

They mention Whitefield has excess capacity and better connectivity. I wonder what has changed w.r.t the access roads to Whitefield. I have a friend who is renting out his Brookefield apartment and living in another rental apartment closer to the city, since the 14km commute to his workplace on Richmond road takes him 2+ hours. So much for better connectivity. It seems to be a pump-up job to create a positive buzz for Whitefield.

Sustained demand for office space

Demand continues to outstrip supply in most micro markets

This Office Snapshot of Bangalore from Cushman & Wakefield, International Real Estate Consultants, is for the first quarter of 2007.

The city continues to witness sustained demand, primarily from IT and ITES sectors. Approximately 1.5 million sq. ft of office space absorption was recorded in Quarter 1, 2007. Peripheral locations like Whitefield, Outer Ring Road and Electronic City accounted for approximately 90 per cent of the total absorption.

Micro markets like Koramangala, C.V. Raman Nagar, Bannerghatta Road and also locations on the Outer Ring Road (South-East and North Bangalore) continue to be active office space destinations.

Across the city leasing activity is considerably marked by transaction sizes’ varying from 150,000 sq. ft. to 450,000 sq. ft. and this robust trend is expected to continue through the year.

Demand continues to outstrip supply in most of the micro markets, except Whitefield, resulting in very limited availability. Of the projected 14.6 million sq. ft in 2007, the ready supply at the end of Quarter 1 is estimated at 2.7 million sq. ft., majority being in Whitefield.

Across Bangalore, about 1.2 million sq. ft. is expected to be completed by Quarter 2.
Vacancy rates

The average estimated vacancy rate across all micro markets is less than 5 per cent with the exception of Whitefield where vacancy is 15-20 per cent. Minimal stock infusion and sustained demand have led to the vacancy rate in CBD, Off CBD and suburban locations being below 3 per cent.

In peripheral locations such as Electronic city (South), Hosur Road and Outer Ring Road (South East), vacancy levels are approximately 6 per cent.

Given the excess supply of approximately 2.5 million sq. ft. in Whitefield, lease rentals have been stable for the last two quarters.

CBD/ Off CBD and suburban locations have witnessed rental escalations of about 7-10 per cent over the last quarter due to lack of quality real estate and limited availability of land parcels for construction.

Sustained demand is expected to cause upward pressure on the rentals in the suburban and peripheral locations.

Whilst the rental and capital values may increase marginally over the next quarter, it is expected that these would stabilise by the end of this year.

Peripheral location of ORR is expected to continue drawing corporate interest and witness price escalations in the short term.

In line with our earlier prognosis, Whitefield is expected to witness active leasing over the next quarters.

This area is being evaluated by corporates for their IT/ ITES and R&D operations owing to low costs and improved traffic accessibility, as it is the only location in the country today that can offer ample ready office space.


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