Bangalore to remain top choice for commercial space next year

Bangalore to remain top choice for commercial space next year

The Hindu Business Line

DESPITE the infrastructure issues, , Bangalore would continue to be the preferred location for high quality commercial office space in 2006 with projected absorption of up to 6 million square feet, according to global real estate consultant Cushman & Wakefield.

Bangalore will surpass Chennai, Hyderabad, Mumbai and the National Capital Region (NCR) both in terms of estimated commitments and supply of commercial office space in 2006. However, in absolute terms, the projections are lower than the uptake witnessed in 2005, indicating a saturation in the city.

"The growth in Bangalore would be based on new entrants, and expansion and consolidation by existing players, primarily in the IT and ITES space. Despite the infrastructure bottlenecks, companies are consolidating their operations — from multiple facilities to a single facility, and the new entrants are flocking to the city, unwilling to reinvent the wheel. Moreover, the supply of workforce is still a strong point driving decisions," Mr Sanjay Verma, Joint Managing Director of Cushman and Wakefield India, told Business Line.

Overall, the commitments for Grade A and B commercial office space across five major cities — Bangalore, Chennai, Hyderabad, Mumbai and the National Capital Region (NCR) — are projected to rise by an average 20 per cent in 2006, largely due to increasing demand for IT and IT-enabled services (ITES).

"The supply and absorption is being fuelled by increase in demand for IT and ITES services. In the last few years, as much as 70-75 per cent absorption has taken place in the category of IT off-shoring and BPO. The balance commitments come from corporate office, sales and marketing and financial sector. In addition, there is an increasing space requirement in the research and development and biotech field," he said.

Bangalore is expected to see absorption or commitments for 5.5-6 million square feet during 2006 (against an estimated 6.8 million square ft in 2005), while the space absorption in Chennai is likely to be about 3.5-4 million square ft (3.2 million). Hyderabad too is likely to see an absorption of 3.5-4 million square ft (2.80 million); Mumbai, 2.50-2.75 million square ft (2.75 million) and National Capital Region, 3-3.2 million square ft (3.10 million).

On the supply side, the commercial office space in Bangalore is projected to be 7.50-8 million square ft in 2006 (compared to an estimated 9.1 million square ft in 2005). In Chennai, it is likely to be 3.50-4 million square ft (2.3 million in 2005); while for Hyderabad, the supply is estimated at 2.50 million square ft (2.1 million). In Mumbai and the NCR, the supply of Grade A and B commercial office space is expected to be 3.5-4 million square ft and 2.50-3 million square ft respectively in 2006.