Office space segment strong in Bangalore

The office space segment in Bangalore has proven to be more resilient than expected. Although this segment has witnessed a drop in demand, it is still remains healthy.

The overall demand for commercial office space remains subdued as compared to last year, implying caution and a lookout for quality supply at the right pricing.

"Last year the demand was around 12 to 13 million sq ft, while this year it is slightly lower at about 10 to 11 million sq ft," observes Avinash Rao, Regional Director-South, Knight Frank Pvt. Ltd. "This is primarily because of the overall economic conditions. Organisations are slowing down the decision-making process and are being cautious when making a purchase."

The demand is expected to be restrained for the entire year, with the IT and ITES industries contributing to incremental demand and other segments contributing to the exponential demand in the office space sector.

"Even though we are hiring and expanding this year, we are not recruiting the same numbers as last year. We are also focusing on consolidation of space," says a spokesperson of a large IT services firm.

And this is one factor that is still fueling growth. Industry consultant companies and other industry segments are the other contributors to the growth in this segment. These include the likes of Goldman Sachs, Cap Gemini, Caterpillar and Hindustan Lever.

Another trend that has been observed is just a marginal fluctuation in prices in business districts. Although business activity is shifting from central business district (CBD) to the special business district (SBD) and peripheral business district (PBD), there hasn't been much fluctuation in the prices.

"According to our estimates, the prices in the CBDs are stable while those in PBDs and SBDs are fluctuating marginally," says Rao. "The spaces available in the PBDs are primarily for large offices customised to requirements. The ticket sizes however remain more or less the same."

The operational model of this sector has however witnessed a shift. Players are moving from a sale-model to a lease-and-maintenance model. Several IT companies are looking to pre-lease office space to take advantage of the favourable commercial terms currently being proposed by commercial office space developers.