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The trend of companies migrating to offices in suburbs – driven by a combination of cheaper rents and lesser commute times for workforce – has risen sharply over the last decade.
Not only the location-independent IT/ ITeS companies but other sectors too are setting up office spaces in secondary business districts (SBDs) and peripheral business districts (PBDs).
Further, the vacancy at retail malls across major cities in India stands at 20%. In view of inability to sell expensive homes in the existing sluggish market, the realty players are resorting to making smaller apartments.
According to the report titled ‘Indian Real Estate: Headed For A Tectonic Shift?’ by JLL India, the migration is driven by occupier demand for large IT parks and office projects in SBD and PBD precincts. PBD has seen the biggest jump in the share of office stock, rising from 28% in 2004 to 47% in 1H2015.
While the share of SBD in office stock has remained stable over the last several years at around 43% of the total office stock, CBD has witnessed a severe attrition of occupiers and a decline in fresh supply of office space that has led to a significant drop in its share of office stock from about 33% in 2004 to 10% in 1H2015.
The report, which was released today at the real estate conclave, said Delhi NCR has witnessed the most spectacular emergence of alternate business districts in Gurgaon and Noida.
Mumbai has been an exception to the trend of office migration to PBD due to lack of supporting infrastructure and connectivity. However, the city witnessed a steady shift in office stock from prime CBD areas to SBD precincts.
When it comes to occupier profile, the share of IT/ITeS sector in leasing volumes has declined from 48% in 2005 to 32% at the end of 2Q 2015.
ALSO READ: Office space take-up doubles in Delhi in second quarter
This lower absorption, though, is compensated to a large extent by new-age sectors such as e-Commerce. While space absorption declined in the manufacturing sector, it increased in export-driven sectors of healthcare and bio-tech. Banking, financial services and insurance (BFSI) has been relatively stable through the last decade.
Retail Real Estate
Malls have been seeing a lot of churn in recent years. On an average, when business is good, churn rates of around 15-18% have been recorded. In India, the range was 4-8% in well-managed malls during the initial years.
Poorly performing retailers exit malls midway through their lease contracts or landlords initiate churn to improve their portfolio of tenants at some locations while at unviable locations, retailers are driving the churn. Contract periods have shortened to 2-5 years today from 9-20 years seen in the mid-2000s.
Not only the location-independent IT/ ITeS companies but other sectors too are setting up office spaces in secondary business districts (SBDs) and peripheral business districts (PBDs).
Further, the vacancy at retail malls across major cities in India stands at 20%. In view of inability to sell expensive homes in the existing sluggish market, the realty players are resorting to making smaller apartments.
According to the report titled ‘Indian Real Estate: Headed For A Tectonic Shift?’ by JLL India, the migration is driven by occupier demand for large IT parks and office projects in SBD and PBD precincts. PBD has seen the biggest jump in the share of office stock, rising from 28% in 2004 to 47% in 1H2015.
While the share of SBD in office stock has remained stable over the last several years at around 43% of the total office stock, CBD has witnessed a severe attrition of occupiers and a decline in fresh supply of office space that has led to a significant drop in its share of office stock from about 33% in 2004 to 10% in 1H2015.
The report, which was released today at the real estate conclave, said Delhi NCR has witnessed the most spectacular emergence of alternate business districts in Gurgaon and Noida.
Mumbai has been an exception to the trend of office migration to PBD due to lack of supporting infrastructure and connectivity. However, the city witnessed a steady shift in office stock from prime CBD areas to SBD precincts.
When it comes to occupier profile, the share of IT/ITeS sector in leasing volumes has declined from 48% in 2005 to 32% at the end of 2Q 2015.
ALSO READ: Office space take-up doubles in Delhi in second quarter
This lower absorption, though, is compensated to a large extent by new-age sectors such as e-Commerce. While space absorption declined in the manufacturing sector, it increased in export-driven sectors of healthcare and bio-tech. Banking, financial services and insurance (BFSI) has been relatively stable through the last decade.
Retail Real Estate
Malls have been seeing a lot of churn in recent years. On an average, when business is good, churn rates of around 15-18% have been recorded. In India, the range was 4-8% in well-managed malls during the initial years.
Poorly performing retailers exit malls midway through their lease contracts or landlords initiate churn to improve their portfolio of tenants at some locations while at unviable locations, retailers are driving the churn. Contract periods have shortened to 2-5 years today from 9-20 years seen in the mid-2000s.
The overall vacancy rate today stands high at 20% in retail malls across major Indian cities. On the contrary, malls that run successfully have vacancies of not more than 10%, with a selective few ones operating near full capacities.
In recent years, we have seen bad malls beginning to succumb to the business viability stress and giving up hope. Consequently, these malls are either converting into Grade-B office spaces or getting demolished to make way for a new asset class in real estate.
ALSO READ: E-commerce firms 2nd-largest occupier of office space: CBRE
In the near future, a few more malls are expected to withdraw from the retail realty business as a result of which, the business of average and good performing malls will improve. This is a much-needed course correction, which will continue to happen for some time. JLL research estimates around 14 malls to withdraw from retail operations, having a combined mall space of 3.5–4.5 million sq ft.
In recent years, we have seen bad malls beginning to succumb to the business viability stress and giving up hope. Consequently, these malls are either converting into Grade-B office spaces or getting demolished to make way for a new asset class in real estate.
ALSO READ: E-commerce firms 2nd-largest occupier of office space: CBRE
In the near future, a few more malls are expected to withdraw from the retail realty business as a result of which, the business of average and good performing malls will improve. This is a much-needed course correction, which will continue to happen for some time. JLL research estimates around 14 malls to withdraw from retail operations, having a combined mall space of 3.5–4.5 million sq ft.
Residential Real Estate
Unable to sell expensive homes in a sluggish market, builders across India are making smaller apartments without lowering the price per square feet and compromising on the quality of product. In the last five years, we have seen average apartment sizes falling across all major cities of India.
Mumbai Metropolitan Region (MMR) witnessed the maximum fall in apartment sizes on annualized basis, along with Bangalore, Chennai and Kolkata. Other cities also witnessed varying degree of fall in median apartment sizes. The dynamics of apartment sizes have a tale to tell – that developers are paying conscious attention to consumers’ requirements.
The fall in average apartment sizes across all top seven cities is a clear indication that developers intend to make houses affordable for buyers by reducing average apartment size instead of reducing the capital values.
