Gurgaon Fast Becoming The Ultimate Office Address

New Delhi, Aug 27 | Updated: Aug 28 2004, 06:50am hrs
Gurgaon is going great guns, it is clear. According to real estate consultant Knight Frank, Gurgaon alone will supply 69 per cent of over 5.5 million square feet of commercial space expected to be added by 2005 across major cities.

New construction will lead to a fall in rentals by 10-15 per cent over the next six months, it said, adding that the additional supply of 4 million sq ft would be double the prevailing demand. However, there is no doubt that the boom will continue, as the present government of Om Prakash Chautala clearly knows it has a good thing going, and is going all-out to make sure the dream doesnt sour.

The commercial property market of Gurgaon has been upbeat for the last two years with many information technology (IT) and IT- enabled service (ITES) companies opting for Gurgaon.

Ninety per cent of the space in a new building like Vatika Triangle (108,000 sq ft) already commands a lease rental of Rs 38 per sq ft per month, and bears signboards like Axel Construction and Louis Berger.

Consultant CB Richard Ellis (CBRE) (South Asia) Anshuman Magazine adds that 3 million sq ft will be added to the total stock in the next 21 months. This suburban market witnessed high levels of corporate interest for large space occupiers, specially in the ITES sector, with net absorption of over 200,000 sq ft in the last quarter and current vacancy levels hovering around 10 per cent, he says.

As demand is keeping pace with supply, values are expected to remain stable in the short to medium term, CBRE predicts. Vertex, Canon, Nokia, May Departmental Stores, Astra Business Services and Western International Universities have signed for about 200,000 sq ft space.

Accelerated demand is likely to help in building healthy supply positions across the NCR, says global real estate solution provider, Cushman & Wakefield. The NCR includes Delhi, Gurgaon, Noida, Greater Noida and Faridabad. It forecasts that values are expected to be stable at current levels. The consultant quotes the capital value of office space in prime Gurgaon area at $80 per sq ft (Rs 3,664 per sq ft). Which is about 0.6 per cent less than the price six months ago. It quotes rental value of prime Gurgaon office property at $10 per sq ft per month, 3 per cent less than six months ago.

Everything Official About It

Half of the new built-up area will be added by DLF Universal while the other half will be by Unitech, Vatika, Ansals, etc.
Eighty per cent of this supply will consist of multi-tenanted buildings with floor plates as large as 38,000 sq ft.
The other 20 per cent, built-to-suit developments, are being leased by developers at an average rate of Rs 28-30 sq ft per month. For example, Ericsson recently leased a built-to-suit development (150,000 sq ft) at an average rental of Rs 30 per sq ft per month.
Palam Triangle has boosted the available supply by 50,000 sq ft. This project is the brainchild of the Ansal Group.

Commenting on the better supply scenario, Cushman & Wakefield says, The NCR seems to have broken free of supply constraints, which in turn has eased demand pressures and ensured price stability. Developers have found buying land a powerful competitive strategy from the medium and long-term perspective as they look to capitalise on strong demand over the next 7-10 years.

It is estimated that over 475 acres changed hands in private districts of Gurgaon and along the Noida-Greater Noida expressway over the past two quarters. This translates into 25 million sq ft of potential supply in addition to the existing licensed lands, it added.

Explaining why his company had opened an office in Gurgaon, Knight Frank executive director (north) Suvir Ahuja said: With big corporate moving to Gurgaon, it has become a potential market for various services of Knight Frank such as agency, facility management, project management and advisory.

NCR is also witnessing major retail developments. The country is expected to have over 220 malls by 2006 of which NCR has a big chunk.

The total mall space in major metros Delhi (including Noida and Gurgaon), Mumbai, Bangalore, Hyd-erabad, Chennai and Kolkata is expected to increase to over 21.1 million square feet by next year. About 5.1 million square feet of mall space is likely to be ready by 2005 in seven non-metro cities - Pune, Ahmedabad, Lucknow, Ludh-iana, Jaipur, Chandigarh and Indore. The total mall supply is expected to reach 26.2 million sq ft by 2005.

But India Property Research head T Chakrabarti sounds a note of caution: The retail segment is under pressure as demand exceeds supply. Gurgaon alone is witnessing the development of 30-35 malls. It is certainly a case of oversupply.