Construction on upswing across all markets in the country

But demand projections remain firm on interest from BPO, IT and ITeS companies

The real estate market for office space across India, driven by the BPO, IT and ITeS industries, remained buoyant.

"The trend is expected to continue in the short-term and efforts are on from state governments to remove the infrastructural bottlenecks in metros which aim to provide an impetus to investments," said CB Richard Ellis's India office market view report for second half FY '05.

Construction is on an upswing across all markets and demand projections remain firm. The real estate market is expected to remain stable or marginally appreciate in some markets in the short and medium term, it added.

In Bangalore, the rental values and capital values have witnessed a marginal increase in the commercial business district (CBD) and non-CBD areas. However, rates have remained stable in the suburban and peripheral micro markets. A major trend emerging in the incoming supply is the large percentage of space being developed with multiple blocks in an IT park configuration.

"This is a telling fact on the maturity that is coming into the real estate market in Bangalore; where quality and quantity of space are being increasingly perceived as co-existent. This is also a win-win situation for the developer as he can achieve economies in cost and time, as well as be perceived as a solid player in the industry," said Ram T Chandnani, Head-south India operations, CB Richard Ellis.

The city's vacancy levels are 4.33 per cent in the CBD as against about 13 per cent for the entire city during the first half of 2005.

In the CBD, prominent transactions in the second quarter include IP Value, Financial Objects, Deloitte, Amba Research, 3M, Caterpillar, Intec and Sun Microsystems.

Companies are increasingly preferring non-CBD areas to locate as they are close to residential localities, thereby reducing expenditure on employee transit. This has impacted leasing in few localities.

Notable transactions in non-CBD areas include BEA Systems, McAfee, Tata Motors, Sanyo, Aztec, KPMG, Shell and DaimlerChrysler.

In suburban and peripheral areas, office space supply in locations such as Whitefield and Electronic City has now overtaken demand hence the rental values are not likely to escalate further in the near future, said the property report.

Notable deals include Tally, Microland, Cap Gemini, Freescaler, Synopsys, LSI Logic, Flextronics, Aviva, AXA Business Services, Tavant and NDS.