E-commerce and startups have driven the office market in Bengaluru in the first six months of 2015. The office property market has seen sales of 6.07 million square feet in the first half this year, of which Amazon and Flipkart together accounted for 3.2 million square feet of pre-committed built-to-suit office space. And that’s about 48% of the total space sold in the period.
“Big-ticket transactions led the city to account for the largest deal sizes in the country. A gradual decline is observed in IT/ITeS dominance and e-commerce has emerged as a major player,” Satish BN, the executive director – South India, Knight Frank, said.
According to a Knight Frank report, a leading real estate consultancy firm, the Bengaluru market has seen a robust growth in office rentals this year compared with other big cities. Average rentals have gone up 6% to Rs 51.5 per sq ft from Rs 48.5 per sq ft in the period compared with the first six months of 2014.
The deal sizes have reduced, averaging close to 54,300 sq ft in H1 2015, while it stood at 71,500 units in H1 2014.
This indicates the advent of more firms with smaller office space requirement, particularly startups, and emphasises on the dearth of large, ready office configurations in the market, the report said. In the first six months of 2014, office space sold in Bengaluru was 6.01 million square feet. The city is expected to see a total absorption of 11.10 million sq ft by the end of 2015.
“Dearth of ready-to-occupy office space is a concern as it is unable to catch up with the quantum of demand, and the depletion impacting on the interests of potential occupiers with large space requirements,” he said.
However, IT and ITeS sectors continue to dominate the office rental market with 50% of the total space sold. The share of other services sector, which includes e-commerce and startups, has gone up to 36% this year from 24% a year ago.
While the city is progressively witnessing additions to its total office space stock, currently standing at 118 million sq ft, the occupied stock has already touched 108.3 mn sq ft to become the office market with the highest occupied stock in the country.
Going forward, the office space demand in Bengaluru is expected to sustain its momentum, fuelled by the increasing corporate interest evinced by both, global as well as domestic companies.
Meanwhile, Bengaluru residential real estate market has seen a dip for the first time in off-take during the January-June period of 2015. Though the tech city has witnessed highest number of new launches in H12015 in the country, it recorded a 40% year on year decline in sales. Property developers have managed to sell little over 22,230 units during the first six months of the calendar year compared to 28,445 units in the same period in 2014.
The average ticket size of residential units has increased 4% to Rs 4,650 per square feet in January-June 2015 compared to same period last year.