Supply of office space in non-CBD areas dries up

Commercial office space rentals in Bangalore's prominent non-commercial business district (CBD) areas "" Indiranagar and Koramangala has firmed up sharply due to low or nil supply.

In these markets, land availability is scarce and does not permit construction of large scale projects. But the key reason attributed to jump in rentals and for short supply of commercial spaces is the significant shift to retail activity owing to the presence of large residential catchments.

Commercial development in Indiranagar is limited and had offered a chance to small to medium sized corporates to house their operations as they do not have large space requirements. A majority of these companies operates out of independent houses that are used as office spaces.

"With regard to commercial space these regions have not witnessed any new supply in the last 15 months, but have witnessed absorption of the older stock that was re-leased to new tenants," said Anurag Mathur joint managing director-India, Cushman and Wakefield.

As for the space absorption, Koramangala witnessed absorption of 157,000 square feet of which 39,700 square feet was recorded in Q4 of 2007 alone where as Indiranagar witnessed about 27,600 square feet last year with no deals recorded in the last quarter.

"Both these markets have ready social infrastructure and access to prime residential locations which adds to their location advantage and hence these regions continue to witness corporate interest. The lack of Grade-A supply in these regions led to 4 per cent rental appreciation over the last quarter," said Anurag Mathur.

According Ram Chandnani, Deputy Managing Director - South India, CB Richard Ellis, "The non-CBD areas continue to be on the radar of companies wanting to stay near the city centre. This coupled with low supply situation have driven the rental values northwards."

"Four major projects are planned in the non-CBD areas, two among them being Special Economic Zones (SEZ) and the other two being non-SEZ. These projects are set to commence around third quarter 2008, and will show strong pre-leasing interest from companies," he added.

Some of the major transactions in this micromarket are Mphasis - 275,000 square feet, Yahoo India - 130,000 square feet, TVS ICS - 26,000 square feet, Ogilvy & Mather - 26,000 square feet and Zinnov Research - 8,000 square feet.