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Bangalore’s office property market witnessed a sharp decline of 37 per cent in the first half of 2013 (January to June), at 3.98 million square feet, compared to the same period last year.
While the initial months exhibited marked restraint on the occupier front, owing to the economic uncertainty in the Europe and other western markets, the latter period saw a resurgence of the pent-up demand.
According to a residential and office research report released by Knight Frank India, a property consultancy firm, subdued economic conditions have led to the delay in occupiers’ decision as they deliberated over their expansion plans.
However, despite the city’s falling absorption, it remains one of the most sought-after office space destinations, preferred by global innovation centres.
The IT and ITeS sector continued to dominate the office space absorption in the city, albeit at a slower pace, even as other sectors have emerged to take up considerable space.
The sector accounted for a majority of 61 per cent occupation, followed by manufacturing at 10 per cent and banking 4 per cent.
“With signs of global economic recovery and green shoots of growth in domestic economy, the outlook is better for office space during the second half (July-December) of this year,” Knight Frank India managing director Shishir Baijal told reporters here after releasing the report.
Whitefield in eastern suburb and area around the Outer Ring Road emerged as preferred locations for office space due to enough supply and competitive rentals.
Demand for office space in suburban markets fell sharply to 13 per cent from 35 per cent last year. Though property prices have been stable over the past few years, a lack of support infrastructure has diminished the investment potential in the city, Baijal said.
“Over the past decade, Bangalore has observed the largest volume of office space absorption in the country, supported by the fairly stable prices and consistent absorption trends.
Several factors continue to make the city ideal for investors, including the presence of a large talent pool, a number of SEZs for IT expansions, development of the Outer Ring Road and the Metro Rail corridor,” the research report said.
The effect of the economic turmoil reflected prominently on the office space absorption in the city as it plummeted to 1.25 million sq ft during the first quarter of 2013 (Q1, 2013), falling 50 per cent compared to the corresponding period in 2012.
The subdued economic condition resulted in a delay in occupiers’ decisions as they deliberated on their expansion / establishment plans, the report said.
The market saw some respite as the second quarter of 2013 (Q2, 2013) brought back traction into the market, clocking an absorption of 2.73 million sq ft., but still lagging the absorption in Q2 by 28 per cent, the report said.
Sandvik Asia and Yes Bank are among the notable manufacturing and BFSI companies that took up office space in H1 2013.
In contrast, the city’s residential market witnessed a 33 percent jump in demand over the same period (H1) in 2012.
“About 28,000 residential units were launched during first half, enabling the city to score a gain of 22 per cent in terms of absorption as against 32 per cent decline in the Mumbai market,” company’s research & advisory services director Samantak Das said.
ITTeS sector continues to be the key driver of the city’s residential market, with the upscale southern suburb witnessing the highest number of new launches in first half.
