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.

Steady housing demand boosts Bangalore developers

The Bangalore residential property market saw absorption of 4,290 units in the second quarter this year against 4,182 units in the first quarter, pushing the absorption rate up from 11 to 12 per cent, according to Jones Lang LaSalle's survey. While unsold stocks in Q2 remained at 32,854 units when compared to 32,978 units in Q1, vacancy rate has declined from 51.1 per cent to 49.5 per cent. This increase in demand was due to a combination of factors like improved sales for built units, investor sentiment over buying than renting and the entry of investors from other Tier I and II cities.

In all 18 residential projects were launched across the city's submarkets in Q2, offering 4,130 units against 5,791 units in Q1. Meanwhile, 15 residential projects comprising 2,336 units across various sub-markets were withdrawn from the active stock as they were completely sold out.

The Hosur road sub-market, comprising Electronic City, Bannerghatta Road, Sarjapur Road and the south-eastern parts of the outer ring road, contributed 35.0 per cent of the total new units available in Q2, while Bellary road sub-market accounted for 10.6 per cent. The secondary sub-market, comprising Indiranagar, Koramangala, RT Nagar, Sanjay Nagar, Old Airport Road, Banashankari, BTM layout, Marthahalli and parts of Sarjapur road, contributed 10.0 per cent of the total and the Tumkur road sub-market accounted for 17.2 per cent.

Among the landmark projects launched during the second quarter, specific mention should be made of DSR Sunrise Towers, Vaswani Brentwood, Embassy Lake Terrace, SJR Paddington, Brigade Orchids and DivyaShree 77'East.

Capital values appreciated marginally across various sub-markets due to increase in sales volumes and prices at most projects that are nearing completion. In fact, rentals rose in Q2 due to the influx of people and shortage of built apartments. The trend is likely to increase over the remainder of the year due to expected improvement in IT/ITES employment figures.

"The residential market is likely to continue its steady demand during the remainder of the year. Capital values are expected to stabilise and rentals for residential properties in the city are forecast to record marginal growth," says N S Srinivasa Reddy, Assistant Vice-President-Research, Jones Lang LaSalle. There may be fewer residential launches during the remainder of this year due to stable demand and large inventory of unsold space. However, areas like Whitefield, Sarjapur Road, Bellary Road and secondary sub-markets are expected to see a modest number of launches.

HC warns BDA against piecemeal approach in land use change

The Karnataka High Court on Thursday asked the Bangalore Development Authority not to adopt a piecemeal or case-by-case approach while giving permission for land use change in Bangalore.

“If you do it piecemeal, you’re in trouble,” a division bench headed by Chief Justice Vikramajit Sen observed while refusing to vacate or alter, for the time being, a January 25 interim order.

The court had asked BDA not to allow permission for redevelopment and reconstruction except for residential purposes in Malleswaram, Richmond Town, Vasantnagar, Jayanagar, Vijayanagar, Visveshwarpura, Rajajinagar and RT Nagar, among other localities. This order was issued on a batch of PILs relating to the Revised Master Plan 2015. The matter was adjourned to August 16.

BDA counsel’s plea seeking clarification on the interim order prompted the bench to ask: “Are there uneducated people at BDA? Can’t they understand our order?”

BDA counsel said: “We haven’t touched a single application since the January order… But in areas abutting ring roads, certain permissible usages are there in the master plan itself. We want to consider those applications on a case-by-case basis.”

However, counsel for petitioners, Citizens Action Forum, said such a permission would render the Karnataka Town and Planning Act redundant and complained that Section 14 A of the Act is being indiscriminately used. He also alleged BDA had granted nine such permissions in Malleswaram alone after the interim order.

Citizens Action Forum had claimed that master plan 2015, notified by the BDA on June 25, 2007, is without jurisdiction. “There has been steep reduction in the green belt area from 56% in the 1995 plan to 35% in the present one. In 1995, it was 714 sq km and now it has shrunk by 300 sq km. They have done away with zonal planning by permitting mixed use of land. The increase in floor area ratio (FAR) will increase the density of population and virtually choke the city. This exercise has been done ignoring suggestions of BMRDA as well as BWSSB,” it argued.

Notice to railways on suburban trains

A division bench headed by Chief Justice Vikramajit Sen ordered notice to the Railways and the state government with regard to a PIL seeking suburban rail services in Bangalore. Petitioner Satinderpal Chopra claimed that even though many cities like Mumbai, Kolkata, Ahmedabad and Hyderabad have been chosen for such a service, Bangalore has been neglected.

Office space demand in April-June 2012 quarter subdued as occupiers remain cautious

The demand for office space in the country remained subdued because of a cautious sentiment amongst occupiers. The total take up of office space in the April-June 2012 quarter was 5.9 million sq ft, a decrease of 21% q-o-q and 47% y-o-y, according to a recent report by property advisory firm DTZ.

The city of Bangalore saw the highest amount of space take up at 1.8 million sq ft. Mumbai saw a sharp fall of 68% in take up.

“The IT/ITES and BFSI sectors continued to drive leasing activity across the seven markets, but at a much lower level than seen in previous quarter. Occupiers generally remain cautious and the number of pre-leases declined considerably over the quarter. An increase in activity is expected, once more clarity emerges regarding the direction of the economy,” said the report.

The total stock of grade A office space in the seven main Indian cities stands at 379 million sq ft at the end of June 2012 as compared to 376 million sq ft in previous quarter.

The demand for office space in Delhi-NCR strengthened in the quarter with a total of 1.67 million sq ft, an increase of 92% q-o-q. “Demand in the NCR was primarily driven by the traditional IT/ITES sector followed by consulting and manufacturing companies,” said the report.

The peripheral business district of Gurgaon saw a 261% increase in take up of space and Noida witnessed the sharpest fall by 83% q-o-q. The central business district saw a slight increase in the availability ratio as companies moved to cheaper locations in Gurgoan and Noida.

The April-June quarter saw an overall reduction of 28% in new supply coming into the NCR market. Only 0.71 million sq ft of completed space was added to the market. “The drop was primarily due to the fact that developers delayed the delivery of projects owing to rising input costs and a liquidity crunch on account of high lending rates,” said the report.

Sogefi SpA : Sogefi (CIR Group): launches two plants in India

New suspension components plant opened in Pune and filter system factory in Bangalore doubled in size

The objective is to reach at least 5% of the group's total revenues in India in the next five years up from 1.2% in 2011. The initiative is part of Sogefi's strategy of growth in emerging markets Pune (India), Milan, July 4 2012 - Sogefi, the automotive components company of the Cir group, is consolidating its presence in India with the launch of a new suspension components plant in the Pune area and with the doubling in size of the factory producing filter systems in the Bangalore area.

Urban world: Cities and the rise of the consuming class

Numeca opens branch office in Bangalore

Belgium-based Numeca International, a software and service provider in computational fluid dynamics (CFD), has opened a branch office in Bangalore.

Opening of this branch office in India follows the opening of Numeca branch offices in Japan, the US and China.

This worldwide expansion is part of Numeca’s global strategy to bring its customer service to local markets and provide its software solutions to companies globally.

Development centre

The company is planning to set up a development centre in the near future, according to Numeca officials.

Professor Charles Hirsch, President and founder of Numeca, said: “An office in India will allow us to work more closely with local customers and will significantly reinforce the company’s position in this strategic market.”

Numeca's customers

Some of Numeca’s customers are in aerospace & defence, automotive, hydro-engineering, marine, power & propulsion and wind energy industries.

The customers include GE, Honeywell, Rolls Royce, Pratt & Whitney, Airbus, ABB, Siemens, Ford, Volkswagen, Honda, MAN, and Emirates Team.

Numeca International has direct offices and support centres in the US, China, Japan and India and partner offices in Russia, Italy, Spain, Poland, Indonesia, Malaysia, South Korea, Turkey, Germany, France and Taiwan.

Product strategy

The company’s product strategy is based on the development of automated, integrated and customised software systems allowing optimal and rapid simulation, design and optimisation and its India development centre is in line with that.

“Until recently, we have been working with Indian customers through our partners. Now, there will be a closer synergy between the customer and us. Numeca brings affordable technologies to help students and researchers to meet the growing needs of universities and research institutions’ engineering demands with OpenLabs. OpenLabs allows students to put their own physical models into CFD solutions without much programming skills. Numeca is strongly working with Indian universities, research institutions to bridge the gap between academia and industries with our attractive and cost-effective Numeca class-room packages,” said Mr Kishore Nellutla, India’s sales & operations head, Numeca.