Saturday, March 29, 2008

IT driving commercial realty market in city

IT driving commercial realty market in city
Many localities in the city will see large scale commercial development due to the demand from this sector, says
Poornima B V

Bangalore has witnessed unprecedented growth in the past few years, with a huge demand for housing and office space, driven by the IT and ITeS sectors. The city has become a major investment destination and has been expanding on all sides in order to cope with this unprecedented growth. Bangalore South and East have always been the city's IT hubs. It's not surprising therefore, that an increasing number of structures have been converted to IT parks around the city.
Whitefield, Sarjapur Road, Hosur Road, Electronic City and other areas have seen unprecedented growth. Some industrial belts too are witnessing IT related developments. Anticipating this demand, the state government has thrown open some areas in Bangalore West, East and South for IT development.
Another concept that has heralded a new era in the real estate sector is the IT corridor concept in Whitefield which has had a far-reaching effect on the city's real estate prospects. It has redefined the city's status as a global investment destination. A huge influx of multinational companies and the expansion of domestic companies have also added to this growth.
The city attracts a huge floating population, thereby increasing the demand for housing. This has led to the development of residential enclaves, villas and apartments with luxurious amenities that provide a better quality of life. Mixed land use, residential enclaves, community living and integrated housing has meant high investment returns leading to augmentation in the residential sector. According to Knight Frank Research, it is estimated that the city will have a residential supply of approximately 6.4 million sqft by 2009-10.
According to Cushman and Wakefield Research, peripheral locations like the Outer Ring Road, Whitefield, Kanakapura Road and Bannerghatta Road have been the major contributors to the Bangalore residential supply throughout the year. This has been mainly due to the fact that large parcels of land have been available here. Moreover, the development of an IT corridor from the East to the South along the Outer Ring Road, Bannerghatta Road and Hosur Road has led to a huge supply of IT parks, SEZs and campus style developments in these locations. It is believed that suburban and peripheral locations will continue to draw investors from IT and ITsS companies.
Growth triggers
The city is all set to become a global investment hub with various infrastructure related activities being taken up. Projects like the peripheral ring roads, the proposed monorail and metro rail, and the international airport that's coming up, have also triggered new developments around these areas. Bangalore has therefore become a top investment destination for both global and domestic investors.
Office space
According to Knight Frank Research, almost 70 percent of the total office space absorption in Bangalore has been from the IT/ITeS sectors. Micro-markets are easily accessible, have good infrastructure and also have residential localities in the vicinity. Major expansions are taking place here, fueling the development of sprawling built-tosuit campuses.
Although there has been no addition to the office space stock in the central locations, the demand for prime property has been high. Developers are therefore addressing the high levels of demand by providing quality built-up space to satisfy the growing needs of the knowledge sector, which requires large floor plates, ample parking space, captive power, and air conditioning, and building management systems, in peripheral areas.
According to Knight Frank Research, rentals in the CBD have reached a peak of Rs 90 per sqft per month and in off-CBD locations, rental values ranged from Rs 60-70 per sqft per month. This represents an increase of close to 25 percent over last year's values. A further increase in these values is expected due to the lack of new supply.
The rentals in Whitefield are currently at Rs 25-35 per sqft per month. In the southeast quadrant, on Sarjapur-Outer Ring Road, the rental values range from Rs 50-60 per sqft per month while in Bannerghatta Road, rentals range from Rs 50-60 per sqft per month.
The Maratahalli - Sarjapur stretch and the Hebbal quadrant of the Outer Ring Road are likely to continue to be the preferred destinations in 2008 with a total expected commercial office space supply of approximately 13.5 million sqft. Of this, 34 percent is accounted by precommitments scheduled to be delivered in the year 2008. Five out of the ten 'notified' non-captive SEZ developments in the city are located in these regions and are likely to account for 2.5 million sqft of supply in 2008.
Keeping up with last year's trend, the peripheral regions will continue to be the highest contributors of supply for the year. Further, rental values are likely to continue to strengthen in the first half of 2008, owing to the limited availability of ready-to-movein supply in the Marathahalli - Sarjapur stretch and the Hebbal quadrant of Outer Ring Road. The city is poised for high-density vertical growth in the future.


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