The Year 2005 saw 8.5 million sq.ft. of commercial office space absorption in Bangalore , a number that featured amongst the highest of its kind in the world.
The IT Software Services/ ITES companies have been for long seen as the highest contributor to Banglore's growing real estate absorption. These software firms, both Indian as well as large multinationals have continued to see the promise in Bangalore , and between visits from John Chambers (Cisco) to Micheal Dell (Dell), the investment commitments by these companies have only grown, leaving a trail of large real estates portfolios.
The first quarter of 2006 was also witness to the foray of private equity formally into Bangalore 's realty mart, with Morgan Stanley investing about $68 millions. Also, Siachen Capital LLC, a New York-based private equity firm, also announced that it will be investing $100 million in two phases in Nitesh Estates; this US company would invest $30 million in the first phase through an SPV route. The interest and activity level of other private equity funds has kept the market abuzz.
The Rental values in the first quarter have remained more or less stable across the micro markets. However, capital values have continued their upward march, and with growing paucity of quality land parcels in coveted locations, prices are scaling unheard peaks. This inexorable increase in land prices presents an intriguing trend. Land prices are on the up in micromarkets like Outer Ring Road where vacancy is very low (and office space demand is high as well as in a micromarket like whitefield where there is already increasing demand of office space and high vacancy rate.
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The Central Business district (CBD) remains the most attractive and suitable micromarkets for new companies entering Bangalore . The central locations offers ease of accessibility and visibility for these new companies and allows established companies to retain brand equity by being in the heart of the city.
The CBD has recently seen companies like 3M, Citibank, UTI Ventures, Kawasaki , Regue, JLL, Cable & Wireless, Amba Research among others commit to a large office complex on Vittal Mallya Road , that will be complete only in the 3 rd quarter of 2006.
Approximately 60,000 sq.ft. of commercial office space is expected in to be completed in the second quarter of 2006; and about 700,000 sq.ft office space to be completed in the second half of the year.
Prominent transactions of this quarter in the CBD include SCT leasing 11,000 sq.ft. on Langford Road , Adidas leasing 14,000 sq.ft. on Main Guard Cross Road , Citibank Leasing 81,000 sq.ft. and UTI Bank leasing 11,000 sq.ft. in Vittal Mallaya Road, GE leasing 12,000 sq.ft. and Curam software leasing 12,000 sq.ft on Murphy Road .
PA Consulting Group and Quintile has leased office space at Nitesh Timesquare.
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The Non CBD area is being observed as the most preferred location for setting up office for high end engineering companies for setting up R&D centers/labs as well as high end support functions.
Approximately 500,000 sq.ft. of commercial space is come into the market in the first quarter of 2006 in the Non CBD areas, And 600,000 sq.ft of space is expected to come in each in the second quarter as well as 3 & 4.
Some of the notable transactions include space take-up by Target Corporation leasing, BEA Systems leasing and Lenovol
Leasing on the Inner Ring Road, Next PLC leasing on Airport Road , Pantaloon leasing, Reuters leasing, and Agilent leasing on Old Madras Road .
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The Suburban micromarket is another zone that has witnessed high level of space take up by corporates over the year; and forseeing further demand, developers have committed to deliver approximately 1.5 million sq.ft. of space in 2006. Scarcity of space in the Non CBD area is furthering the case for location of corporates in the micromarkets.
The Outer Ring Road, in the Peripheral micromarket is already the highest micromarket in Bangalore that is currently host to The likes of Intel. Accenture, JP Morgan, Chase, Flextronics, Freescale, Symbol, Cadence, Broadcom, Intuit and Cap Gemini (committed space) among others.
The Whitefield area is another major zone for commercial/ office developments, a traditional favourite and one of the landmarks of real estate growth in Bangalore . Due to the large quantum of space coming up simultaneously in this location experiencing an over-supply condition. This is contary to the situation on the Outer Ring Road, where projects came up sequentially allowing the market enough time to absorb them, and fuel more demand.
Approximately 1.5 million sq.ft. of commercial office space is expected to come into the market in Q2 2006 in the Suburban areas and 1.6 million in the peripheral market. In the second half of the year, there is approximately 5.8 million sq.ft. of commercial office supply expected in the suburban and peripheral micromarkets.
Some of the notable transactions include RelQ Software leasing, Radio Mirchi leasing and Yantra Software leasing on Bannerghatta Road , TCS leasing and GM leasing in Whitefield, Webmethods leasing Nokia leasing, ARM leasing, Softbrands leasing, Coats leasing on the Outer Ring Road .
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The Bangalore Metro Rail Project has been one of the main topics of discussion this quarter, in fact the Bangalore Metro Project details have been put forth to the public. There is a projected 33km rail lines, that aims to go live in October 2009
(Phase 1).
Prohibitive rising land costs has been one of the major causes of heartache to the property mart. The developers are facing extreme shortage of quality land; and the land prices have been spiraling to unreal limits. At such rate there could soon be questions raised on the feasibility of doing a project in an infrastructure-starved city like Bangalore vis-à-vis other upcoming locations like Hyderabad .
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Bangalore continued to have an edge over the other cities in terms of space take up by the BPO and IT sectors, with an increasing number of companies preferring to locate their operations here. The government too is ramping up its efforts in overhauling the infrastructure in the city, which currently is quite over burdened by the burgeoning corporate interest.
Most organizations that are planning to consolidate operations and/ or expansion continue to evaluate build- to-suit campus style facilities to ensure lower costs, control on building design & quality, adequate parking and built-in growth potential.
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There has been a considerable demand for Grade "A" commercial properties in CBD, which has resulted in excellent absorption/leasing of Grade "A" commercial properties in CBD. The demand is driven by existing companies that require to expand in immediate vicinity of their facilities and also for short term requirement by companies deciding on a built to suit facility.
Approximately 1 million sq.ft. of Grade "A" space is under construction in the CBD, of which approximately 118,365 sq.ft. is in the final stages of completion and would be ready for possession by 1 st quarter 2004, around 272,718 sq.ft. would be ready for possession by 2 nd quarter 2004, another around 64,700 sq.ft. would be ready for possession by 3 rd quarter 2004 and approximately 600,000 sq.ft would be ready for possession by 4 th quarter 2004.
Among the notable leasing transactions of the last quarter were acquisitions by; Intel of around 48,595 sq.ft. on Brunton Road, Logica of approximately 35,000 sq.ft on Residency Road, Trianz of approximately 17,140 sq.ft on Lavelle Road, Globus of approximately 16,986 sq.ft. on Richmond Road, GRIC Software of approximately 16,908 sq.ft on Brunton Road, Cyberwerx of approximately 8,987 sq.ft on Brunton Road, Datacraft of approximately 7,200 sq.ft on Lavelle Road, Network Associates of around 6,525 sq.ft. on Murphy Road, Financial Objects of approximately 4,305 sq.ft on Vittal Mallya Road and by Reuters of approximately 3,600 sq.ft on M.G. Road Reliance committed to purchase approximately 80,000 sq.ft on Richmond Road.
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High levels of absorption activity continued to be witnessed even in the Non CBD areas of the city where many corporates chose to relocate/expand due to availability of quality options offering adequate infrastructure and lower rental values compared to CBD.
Approximately 511,687 sq.ft of Grade "A" space is under construction, out of which 136,687 sq.ft is in the final stages of completion and would be ready for possession by 1st quarter 2004, 275,000 sq.ft., would be ready for possession by 3rd quarter 2004.
Notable transactions include Reuters leasing approximately 77,000 sq.ft. on Airport Road, Essilor SRF leasing approximately 20,000 sq.ft. in Ananda Rao Circle, Schneider Electric leasing approximately 18,730 sq.ft on Mission Road and Canara Bank leasing approximately 8,250 sq.ft on Mission Road.
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| The Peripheral areas remain preferred by the corporates for building their campus style facilities. Consequently these locations have witnessed frenzied construction activity from both developers and also individuals possessing large land banks. The IT corridor along Sarjapur Ring Road has witnessed enormous interest on the part of developers and prospective occupants. Future real estate activity is expected to be concentrated in the suburban and peripheral locations, however with a growing emphasis on the new IT corridor.
Approximately 586,225 sq.ft of Grade "A" space is under construction in the Suburban areas, out of which around 361,225 sq.ft is in the final stages of completion and would be ready for possession by 1st quarter 2004 and 225,000 sq.ft would be ready for possession by 2nd quarter 2004.
Approximately 1,441,000 sq.ft of space is under construction in the Peripheral locations, out of which approximately 906,000 sq.ft is in the final stages of completion and would be ready for possession by 1st quarter 2004 and around 535,000 sq.ft would be ready for possession by 2nd quarter 2004.
Notable leasing transactions of the last quarter include; approximately 300,000 sq.ft on Bannerghatta Road and 167,000 sq.ft in Koramangala, both by Oracle, approximately 100,000 sq.ft in Whitefield by iFlex, approximately 100,000 sq.ft in Whitefield by Transworks, approximately 100,000 sq.ft on Hosur Road by e4e Labs, approximately 60,000 sq.ft. in Electronic City by Hewlett Packard, approximately 60,000 sq.ft. on Hosur Road by Wipro,approximately 54,000 sq.ft. in Peenya by BOC Gas, approximately 14,700 sq.ft. in Koramangala by Synopsis and 4,126 sq.ft by TATA AIG in Koramangala.
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Bangalore is the fastest developing IT & ITES destination in the country and looking at the current scenario, this trend is expected to continue in the short to medium term.
The real estate prices that had stabilized in the last quarter, have witnessed a marginal increase in this quarter. Values are expected to remain buoyant in the short term due to the expected sustainable level of demand |
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