Spike in de­mand of un­der­con­struc­tion of­fice projects

Short­age of ready­to­move­in of­fices and in­creas­ing rentals have led to spike in de­mand

HT Estates - - FRONT PAGE - Bidya Sa­pam bidya.s@livemint.com

MUM­BAI: Ten­ants are rush­ing to sign up­of­fice space even be­fore it hits the mar­ket, builders and bro­kers said, as com­mer­cial rentals rise in In­dia’s top cities struggling with ashort­age of premium space.

Data compiled by prop­erty ad­vi­sory firm CBREshow­softhe to­tal 8 mil­lion sq.ft ex­pected to come up this year in Ben­galuru, nearly 50% has al­ready been pre­leased.

In Na­tional Cap­i­tal Re­gion (NCR), Pune and Hy­der­abad, up to 20% of new sup­ply has al­ready found tak­ers.

CBRE says over 42 mil­lion sq. ft of of­fice space were ab­sorbed in 2017, of which 29 mil­lion sq. ft were fresh sup­ply. “This con­strained avail­abil­ity of ready-to-move-in space, and in­creas­ing rentals have re­sulted in a num­ber of cor­po­rates pre­com­mit­ting to space in un­der­con­struc­tion prop­er­ties,” said Ram Chand­nani, man­ag­ing di­rec­tor (ad­vi­sory and trans­ac­tion ser­vices In­dia) CBRE South Asia Ltd.

Em­bassy Group, RMZ Corp., K Ra­heja Corp. and Panchshil Re­alty are among large builders which have seen ris­ing in­ter­est from bank­ing and fi­nan­cial ser­vices firms, tech­nol­ogy and phar­ma­ceu­ti­cal com­pa­nies.

Pre-com­mit­ing space helps in “ne­go­ti­at­ing favourable rental terms, block con­tigu­ous space for fu­ture ex­pan­sion and ap­pro­pri­ately stag­ger ex­pan­sion as per the devel­op­ment sched­ule,” Chand­nani of CBRE added.

Ben­galuru-based Em­bassy Group said al­most 80% of 2.8 mil­lion sq. ft comin­gupthis year end has al­ready been leased out. Av­er­age oc­cu­pancy at its ex­ist­ing of­fice as­sets across Benga- luru, Pune, Hy­der­abad and Chen­nai stands at around 95%, said Michael Hol­land, CEO, Em­bassy Of­fice Parks.

“There is in­creas­ing oc­cu­pancy and short­age of good qual­ity space. Se­condly, there are num­ber of com­pa­nies which are look­ing at con­sol­i­da­tion into large stand­alone busi­ness parks. This takes a lot of time and plan­ning. So, a few large in­ter­na­tional com­pa­nies would be hedg­ing the space well in ad­vance,” he said.

Ac­cord­ing to Vinod Ro­hira, man­ag­ing di­rec­tor (com­mer­cial real es­tate and REIT), K. Ra­heja Corp., 50-60% of fresh sup­ply com­ing in next 12-18 months in Mum­bai and Pune have al­ready been leased out.

A to­tal of 6 mil­lion sq. ft of of­fice space are ex­pected to be de­liv­ered in these cities dur­ing the pe­riod.

“In cer­tain mi­cro-mar­kets, wherethere is lim­ited sup­ply, we have seen a surge of pre-com­mit­ments. Cus­tomers want to lock in space be­fore it goes away. Peo­ple fear that the new sup­ply would be not catch­ing up with the de­mand,” Ro­hira said.

At present, K. Ra­heja Corp. op­er­ates around 30 mil­lion sq. ft of of­fice space in Mum­bai, Pune, Hy­der­abad and Chen­nai.

Ben­galuru-based RMZ­said­its en­tire sup­ply for the year has al­ready been leased out.

The com­pany ex­pects to com­plete de­vel­op­ing 350,000 sq. ft of of­fice space by year-end.

“There is t re­men­dous de­mand for of­fice space. Head­count pro­jec­tions are high. Peo­ple are hedg­ing their bets. While de­mand is strong, sup­ply is slightly short,” said Thiru­mal Govin­draj, man­ag­ing di­rec­tor, RMZ Corp.

He said of the to­tal five mil­lion sup­ply com­ing up in Ben­galuru in next 24-36 months, one mil­lion would­becom­mit­ted­bythisyear.

Sim­i­larly, in Hy­der­abad, 3.8 mil­lion sq. ft is ex­pected to be com­pleted, and one and half mil­lion is al­ready leased.

“Ben­galuru ab­sorbs around 12 mil­lion each year. How do you keep pace with that kind of de­mand? From the time you ac­quire land till you de­liver a build­ing, it takes around 36 months... and there are only 2-3 large real es­tate builders de­vel­op­ing large good qual­ity space,” he said.

Sim­i­larly, 50% of the to­tal 2.5 mil­lion sq.ft new sup­ply com­ing in at Panchshil Re­alty’s ex­ist­ing Eon In­for­ma­tion Tech­nol­ogy Park in Pune, has al­ready been leased out, said Vivek Rachh, di­rec­tor, cor­po­rate so­lu­tions, Panchshil Re­alty.

“Pre-com­mit­ments have gone up in the last 8-10 quar­ters. It’s gen­er­ally a func­tion of how sup­ply is play­ing out in the mar­ket. There have been times where we havefin­ished con­struct­ing amil­lion sq.ft, it would take around four-six quar­ters to get fully oc­cu­pied,” he said

IN CER­TAIN MICROMARKETS, WHERE THERE IS LIM­ITED SUP­PLY, A SURGE OF PRE­COM­MIT­MENTS IS EV­I­DENT AS CUS­TOMERS WANT TO LOCK SPACE

MINT/FILE

There is in­creas­ing oc­cu­pancy and short­age of good qual­ity space

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