Will corporate realty activity impact housing markets?
Housing demand likely to pick up in peripheral locations of leading cities
Corporate real estate transaction activity rose by 18% year-onyear in 2015 to cross office space absorption of over 38 million sq ft across the leading cities of the country. Almost 32% of this demand for office real estate was generated in Bengaluru, followed by 23% share of the same from Delhi National Capital Region (NCR). The top sectors driving this significant demand for corporate real estate were the IT/ ITeS, banking and financial services, and the e-commerce sectors.
While a major chunk of these transactions were for mid-sized spaces, a significant volume of office space transactions also took place for large-sized spaces of above 100,000 sq ft. in 2015. Most of these large sized transactions, moreover, were closed in the Bengaluru, Gurgaon and Pune office markets during the year. Meanwhile, new supply of corporate office space increased by 40% year-on-year in 2015, with most of this fresh space coming up as commercial office and SEZ space.
With so much happening in the corporate real estate space in the country in recent times, there are bound to be positive f allouts of such activity in India’s residential market as well. When large office complexes, IT Parks and SEZs attract an equally significant volume of employee footfalls, along with the footfalls of related business personnel, it is likely to create opportunities for allied real estate portfolio such as residential, retail and hospitality segments. Furthermore, it is likely that significant opportunities will be created for housing projects targeted at corporate employees in the vicinity of companies with large campuses and office complexes. A sizeable sec- tion of the captive workforce of large office districts will likely seek housing options near their workplaces or in established residential neighborhoods in the vicinity of office hubs.
The industry sector that has the maximum impact on the country’s housing market, moreover, is the IT/ITeS sector. It is heartening to note that the IT/ ITeS industry primarily drove the office market in 2015, with nearly 56% share of the total absorbed corporate real estate space across leading cities. Cities such as Bengaluru, Gurgaon, Chennai and Pune, which have a significant IT/ITeS presence is likely to attract significant midend housing demand from their IT workforce.
With an increasing number of corporate firms settling for cost effective and available quality office properties in the peripheral locations of leading cities, a sizeable volume of the upcoming housing demand is also likely to follow the trend to affordable residential options in these peripheral neighborhoods. Localities to look out for might include projects at Bengaluru’s Whitefield and Outer Ring Road micro- markets, along the Northern and Southern Peripheral Roads in Gurgaon, and at Hadapsar and Agarkar Nagar in Pune.
In addition, corporate relocation to peripheral micro-markets that are specifically ideal for residential real estate as well as office spaces may also create opportunities for mixed- use, integrated township projects. While such allied real estate opportunities exist, however, the simultaneous development of large scale infrastructure projects including social infrastructure is crucial for this real estate development to become successful.