Changing city centre

Changing city centre

Times of India

Bangalore: In a couple of years, Bangalore’s central business district (CBD) could sport a different face. Major IT companies are moving out of the city centre to suburban areas, into large campuses where they are consolidating all operations. That’s expected to dampen real estate prices in the area in the medium term and also change the mix of occupants in favour of service industries like banking, insurance and trade.

According to estimates by real estate consultancies like Jones Lang LaSalle (JLL) and DTZ Debenham Tie Leung (DDTL), some 1.5 million sq ft of Grade-A(highest quality) space occupied by large occupiers in the CBD could be vacated over the next two years. Those expected to shift include Hewlett Packard (HP), which currently occupies about 3,50,000 sq ft of space in the CBD spread across different facilities, Philips, which occupies a similar area, i2 Technologies and Logica.

The UB City will meanwhile create additional Grade-A office space of about 7 lakh sq ft. “All this should stabilise rents in CBD. It’s currently an absolute landlord’s market. This situation could change,” says Ankur Srivastava, managing director of DDTL.

“Grade-B buildings could be particularly impacted,” says Manisha Grover, associate director in JLL. “There are many global corporations who today are operating out of Grade-B buildings because of the non-availability of Grade-A ones. Once Grade-A becomes available, they may shift.”

Currently, Grade-A buildings (bare shell) come at approximately Rs 43/sq ft per month (gone up by 10% in the last 6 months) and Grade-B between Rs 35-38/sq ft per month (marginally up in the last 6 months).

Grover says CBD could soon be dominated by banking, insurance and trading companies, and consultancies. “That’s what has happened in places like Nariman Point in Mumbai and Connaught Place in Delhi. Such service companies have clients all around the city and would therefore like to be situated in a central location,” she says. Already, a number of banks and insurance companies have occupied prime locations on M.G. Road. Srivastava says smaller ITES companies who do not want to incur the cost of ferrying employees to suburban locations may also like the idea of taking space in the CBD once rents stabilise.