13 mn.sq.ft of IT space in the works

That real estate majors are aggressively purchasing land at the emerging IT hubs of Rajarhat and Sector V of West Bengal should not come as a surprise, as various studies indicate that the areas are set to become the IT hub of eastern India in the next three to four years.

According to the latest study by Knight Frank on commercial space, Kolkata is expected to witness an addition of approximately 13.8 million square feet (mn.sft) of office space in the next three years, majority of which will be catering to the IT/ITES sector.

The demand emanating from the sector resulted in the absorption of approximately 1.5 mn.sft in 2006-2007.

Almost 90 per cent of the total leasing transactions took place in the IT/ITES hub of Salt Lake Sector V, with majority of the space taken up in key IT projects such as Technopolis, Millenium City and BIP Omega, the study says.

"With the planned infrastructure development in place, Rajarhat is expected to become the next IT/ITES centre in the city in the next 3-4 years," according to the study.

With the government approving a number of IT SEZs located at Rajarhat, Bantala, Batanagar and Jagdishpur, commercial real estate sector will get a further boost.

However, with infrastructure yet to fully develop at Rajarhat to cater to the needs of industry, the Central Business District (CBD) continues to be the preferred location for offices. Thus last year while the vacancy rate at CBD was below 5 per cent, at Salt Lake it was is around 10 per cent, according to Knight Frank.

Also the rental value at Salt Lake and adjoining areas are yet to catch up with that at CBD.

A similar trend is indicated by another study by Cushman and Wakefield, according to which, at the Salt Lake area, Grade-A office vacancy was at around 5 per cent, while grade-B office vacancy was higher, at about 30 per cent.

According to this study, vacancy levels across all the office locations in the quality office buildings in Kolkata have declined over the last two quarters.

At the CBD area grade-A office witnessed decrease in vacancy rate from last year from 3 per cent to 2 per cent.

At Topsia, grade-A office vacancy has declined from 4 per cent to 1 per cent.

"Kolkata has witnessed increase in space demand from IT / ITES sector and this is fueling the real estate development scale in the city. With increased activity in this sector, the demand for quality residential developments and retail spaces has increased", said Rajneesh Mahajan, national head for transaction services in retail at Cushman & Wakefield.

At CBD the rent was close to Rs 50-80 per square feet per month, while at Salt Lake it was Rs. 40-48 per square feet per month.

At Rajarhat it was Rs 40 per sq.ft. per month, said the Knight Frank study.