Firms reworking their plans has led to higher supply.
Bangalore realty is feeling the effects of the slowdown in the global markets. This has led to corporates deferring or re-evaluating their long term real estate plans. This situation has led to an overall supply of 1.8 million square feet in the city in the second quarter of 2008.
The crisis has forced global firms which had firm space bookings to confirm only half and release the rest in the open market. Other companies are evaluating the option to sub-lease the excess space they had booked to be retrieved at a later date.
Taking advantage of this scenario, a few well-established global IT companies are bullish and are making enquires for space to expand their presence in the city. “The prevailing global market conditions have forced a few clients to reassess their real estate needs and as a result of this, clients who had hard option spaces are now releasing it,” Ram Chandnani, deputy managing director — South India, CB Richard Ellis said.
“Commitments the companies made earlier are now being downsized which has directly affected the supply situation in some locations,” he added.
Bangalore witnessed total space uptake in the second quarter (Q2) of 2008 around 1.7 million square feet. About 1 million square feet of new supply has come into the market and along with 0.8 million square feet of committed space released by various corporates has led to an overall supply of 1.8 million square feet.
“When the rest of the country has shown signs of a slow down in first-half (H1) of this year, Bangalore has bucked the trend so far. The demand figure of seven million square feet for the H1 of the year as compared to last year’s 6.6 million square feet looks positive,” said Anurag Mathur, joint managing director, Cushman and Wakefield-India.
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“On the supply side too, there has been a progressive increase as compared to the first two quarters of last year. The office market in Bangalore and many other parts of the country is driven largely by the IT occupiers and with most of the IT majors based out of the US, the recession has done its share to impact the space take up,” he added.
Confirming the development, Anuj Puri, chairman and country head, Jones Lang LaSalle Meghraj, said, “We have seen a remarkable change in activity since last year. Developers of IT/ITeS space would ideally expect 90-95 per cent of pre-leasing for their projects. However, pre-leasing activity in most projects has now declined to between 80-85 per cent. In this present scenario, Bangalore has been spared and a few IT and ITeS companies are helping it hold on robustly to its status as the country’s IT hub.”
“Having created so much equity over the past few years, and also thanks to the latest government initiatives, its clement weather and its cosmopolitan nature, it is holding steady in terms of demand. In terms of its relative growth, it has definitely taken a moderate beating as compared to last year, but it is still growing,” he added.
These decisions of IT companies has led to a fair amount of Software Technology Park (STP) and SEZ Grade-A space being readily available in the Outer Ring Road stretch between Marathahalli and Sarjapur. Also, second generation space is slated to open up in the next quarter.
“Corporates requiring large spaces favour this micro-market due to the quality and size of the available developments. However, decisions to commit space have been deferred,” said Ram Chandnani.