 "Demand rises for small offices, with start-ups & investors fuelling demand")
The demand for small office spaces, less than 10,000 sq ft, is rising.
The reason is a mushrooming of start-ups, both in internet and physical space, and investors betting on better yields in office spaces.
Transactions in small-size transactions, both leasing and buying, constituted 41 per cent of office take-up in the country in the June to September quarter, says a report by property consultant CBRE. Those between 10,000 and 30,000 sq ft accounted for 33 per cent.
“Thousands of start-ups come up every month in cities such as Bengaluru, Pune and Mumbai. These firms are driving demand for small office spaces. When they get funding from investors, they go for larger spaces,” said Ashok Kumar, managing director of Cresa Partners, a property consultant
“Investors also want them to have larger space as they have given them growth capital,” he added.
Balaji Raghavan, head, real estate practice, IIFL Group, said in places such as Mumbai, upwardly mobile professional and small and medium enterprises had problems in finding small Grade-A spaces in the past. “There is a huge and uncatered demand for such spaces, which developers are realising,” he said.
The second reason, experts said, is that investors have realised that yields in office properties are better than house properties. Yields in the former are 9-9.5 per cent a year, compared to two to three per cent in residential property.
“The improvement in large office space deals is also encouraging investors to buy small properties and lease it out,” said Kumar of Cresa. At 9-9.5 per cent, they are buying these properties.
