BPO to spawn 20 m sq ft realty demand: Report

Demand for more than 20 million square feet of real estate is likely to be generated by business processing outsourcing (BPO) companies over three years, according to Cushman & Wakefield (India), a global real estate consulting firm.

In a recent survey on BPO services, the consulting firm said: "A total of above 20 million square feet is expected to absorbed between 2003 and 2006 by information technology and enabled services corporates and their campus requirements as well."

Banking, financial service, insurance are expected to create demand for more than five million square feet property during this period.

The survey added that these estimates were on current plans of corporations who have already identified off-shore destination and, hence, there could be substantial increase in actual demand for space over the next 12-18 months.

The global BPO industry is estimated to grow to $611.4 billion by 2005, with India accounting for 38 per cent of the market share, according global research firm Gartner. Bangalore remains the most preferred destination.

However, demand in Mumbai has been gradually rising. This is an indication that Mumbai is no longer an expensive city for real estate destination, the report said.

Companies have preferred to locate campuses in Hyderabad and Chennai because of low land cost and government incentives. In the national capital region, which includes New Delhi and surrounding regions such as Noida and Gurgaon, the companies continue to operate at ready built premises.

The built-to-suit developments are popular with large firm due to better economies of scales, the report said.

On the supply side, developers in Bangalore and Mumbai are gearing up to meet accelerated demand.

The national capital region and Hyderabad offer quality built-to-suit opportunities. However, the supply situation in Chennai and Pune remain constrained in the short-term.

The survey also said that there is a gradual parity of lease rentals in suburban and peripheral micro-markets across all cities except Kolkata.