Bangalore tops office space market charts

Bangalore tops office space market charts

The Times of India

Few cities in the world have the power to attract and motivate a casual visitor to move there permanently. Bangalore, with its friendly climate and employment opportunities beckons many to make it a base. It was called the Electronic City of India, and the advent of IT in the city has converted it into a Silicon City. The city is a base for many Indian as well as multinational IT companies. Bangalore has made a niche for itself in the international arena in terms of its growth.

But the recent reports of crumbling infrastructure of Bangalore have put fear in the minds of IT captains. Though these facts are disturbing, experts in the real estate field including, Jones Lang LaSalle and Cushman and Wakefield beg to differ on this stating Bangalore is still a favourite place for office space and continues to be a hotspot for global ventures.

Digest this: Bangalore accounts for 32 percent, i.e. nearly a third of all demand for office space in the metros across the country in 2004. The lease transactions the city has witnessed is 3.2 million sqft while New Delhi (Gurgaon and Noida) stood at 1.4 million sqft, Mumbai at 2.1 million sqft, Chennai at 1.45 million sqft and Kolkata at 1.1 million sqft between January and October 2004.

Says Manisha Grover, Associate Director, Strategic Consulting and Research, Jones Lang LaSalle: "Bangalore, despite its strained infrastructure, would continue to remain as India's premier location for office real estate demand and supply in 2005. Though the likely challengers for IT/ITES investment in the medium-term are Chennai (southern region), National Capital Region (northern region) and Pune (western region), Bangalore's real estate potentials would continue to be explored. We are at the fag end of 2004 and a lot of office leasing transactions would take place in the month of December with IT/ITES companies that form a large chunk of takers for office space. The figures, however, of these transactions will be out only in January 2005".

She added that Bangalore leads the market in terms of future supply of commercial space in the coming year by far. This is a leading indicator of the optimism of developers in the demand scenario for office space in Bangalore. The other factor that indicates the dearth for office space is the price escalations for 2003-04 that was registered at nine percent in the Central Business District (areas in and around M G Road), seven percent in the Secondary Business District (Airport Road, Bannerghatta Road, Koramangala etc) and eight percent in the Peripheral District (Whitefield, Outer Ring Road).

Ashish B Singh, Regional Manager, Cushman and Wakefield, agrees saying that though the real estate rates in a few parts of Mumbai and New Delhi are high, the sheer market size of Bangalore office space beats them all. But the government has to buck up on the infrastructure front, he says. However, it is at a premature stage to say that companies would migrate or relocate to other places.

On the positive side, industry sources reveal that SAP Labs is setting up another facility in the city as a part of its expansion plans to cater to a larger market in India. SAP is also planning to expand its workforce by approximately 1,300 in 2005. It already has a significant presence in the eastern peripheral location of Whitefield. Samsung's Indian arm is planning to increase the headcount in their Bangalore R&D facility by 1,400 employees. It is also planning on increasing its product line and extending its retail presence, especially in IT hardware. Power and automation major, ABB, has plans of investing US$ 100 million, over a period of three years (2004-06), to ramp up its existing R&D facility and set up an engineering design center. In an effort to strengthen its commitment to India, Swedish engineering major, SKF has set up a Rs 700 crores R&D facility in the city. The centre is to undertake designing, testing and simulation. SKF has a fully operational manufacturing plant with a work force of 450 employees, located on Hosur Road.

Ashish adds that the city, apart from being an IT destination, is also gradually attracting interest for R&D operations. Companies from diverse manufacturing backgrounds are looking at setting up their research and development centres in the city with a view to strengthen their presence in the region and also utilise the human resource pool available. But the key demand driver still continues to be the IT/ITES sectors. Apart from the built-to-suit options, speculative developments are also being readily absorbed.

Actual office space leased (January to October 2004)

Bangalore : 3.2
Mumbai : 2.1
New Delhi (Gurgaon and Noida) : 1.4
Chennai : 1.45
Kolkata : 1.1

Figures in million sqft


Estimated supply of office space
Major cities - 2005-06

Bangalore : 5.1
New Delhi : 3.4
Mumbai : 2.8
Chennai : 1.9
Kolkata : 1.6

Figures in million sqft