office space in bangalore

Monday, 8 February 2016

2015 – A Favourable Year for Real Estate Industry


The office space absorption in India stood at 35 million square feet in 2015, which is the second highest absorption rate after 2011. While the vacancy in PAN-India stands at 16%, it’s just 8-9% that’s being supplied to the corporate occupiers.


The major cities like Bengaluru, Pune, Chennai and Hyderabad have a vacancy rate for office space is  just 5-10%, and they are prompting the need for fresh supply to meet the growing demands. Though, the land and construction costs are rising each day, rents have not reached a point where developers can get an IRR (Internal Rate of Return) of about 20%. This has been a main reason for developers moving away from commercial projects.
Residential Real Estate
Though the year 2015 didn’t bring up the expected growth in residential real estate, the bad days seems to have vanished. The sales have picked up in a few major cities like Mumbai, Bengaluru and Hyderabad. The initiatives taken by developers like offering attractive schemes and deal terms along with the lowered interest rates seem to have engaged the fence-sitters. The signs look encouraging; so the year 2016 seems to put an end to the difficult journey of the sector.
Retail Real Estate
The year hardly saw major happenings in the retail real estate sector. However, two big trends were noticed.
·         Consolidation of retail real estates by retailers and brands that focussed on the profit making stores closing down the loss causing ones.
·         Entry of institutional investors; this would make the single brand retail companies undertake ecommerce business independently.
More and more mature investors are expected to come and buy built-up real estate spaces in 2016.
Manufacturing and Warehousing
The year did nothing except putting a solid foundation for the manufacturing sector to get going in 2016. Under the Make in India programme, the states can come up with their own strategies, schemes and policies, which would help them in fuelling the industrial growth.  The warehousing sector seem to be reaching an inflection point and it’s sure to take a huge leap forward once the Goods and Service Tax (GST) is rolled out.
The real estate industry is getting matured each day; until 2014, the industry was highly inefficient, fragmented and unregulated. Though 2016 is expected to bring in some positive changes in the industry, the experts still feel that the industry still remains fragmented and moderately inefficient in 2016 as well! Only the growth in Indian economy can bring some favourable reflections in the real estate sector.

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Tuesday, 2 February 2016

Bengaluru Tops the Chart of Cities Having Great Demand for Office Space!

According to a recent research made on the corporate real estate, Bengaluru seemed to lead the demand for corporate real estate spaces among the top seven cities in India in the year 2015. The report stated that, the demand for ‘Grade A’ office space among top seven cities in the country rose up to 18%, which touched an all-time high demand of 38 million square feet in 2015.
But what has to be noted is that, out of 38 million square feet, Bengaluru led the race with the share of 32% (12.2 million square feet) driven by the demand from traditional IT and new ecommerce companies. Even in 2014, 33 million square feet was the total office space absorption in which 34.2% was contributed only by Bengaluru.
India – Established Outsourcing Destination
Anshuman Magazine, the managing director of CBRE (Real Estate Services Firm) said in an interview that, India has been a favourite outsourcing destination for many multinationals who wish to outsource their operations to major cities in India, and this has been a main reason for the sustained spurt in office transaction activity. This combined with the positive market sentiment and macro-economic climate, has encouraged office space occupier demand in the year 2015.
Areas in High Demand in Bengaluru
The micro markets of Bengaluru which saw a major increase in office absorption include Electronic City, Whitefield, Jayanagar, JP Nagar and Sarjapur Outer Ring Road (ORR) stretch. In Electronic City and Whitefield, the transactions were mainly driven by IT/ITes companies for small and large sized office spaces, but in ORR region, the demand was mainly because of ecommerce companies.
Rental Appreciation on Quarterly Basis
The report also said that, the Outer Ring Road (ORR) region witnessed the completion of three prominent Special Economic Zones (SEZ) and commercial investment grade projects.  Also, the sustained demand from occupiers and limited availability of quality spaces resulted in the rental appreciation of about 1-2% on a quarterly basis across both SEZ and IT segments.
Looking at the reports, Ram Chandnani, the managing director of transaction services at CBRE South Asia said that, the corporate occupier demand for office spaces seems to continue its growth in the coming months also. According to him, the consolidation and expansion strategies of corporate agencies will continue to be in the Greenfield projects whereas the pre-committed space will be in under-construction projects, and it seems to be true if we go with the statistics.

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