Offices biz looks up as firms seek scarce quality addresses

Written by Shubhra Tandon | Mumbai | Updated: Dec 19 2014, 14:30pm hrs
Office spaceRenewed interest among corporate occupiers has led to developers of office spaces asking for higher prices. (Reuters)
Renewed interest among corporate occupiers has led to developers of office spaces asking for higher prices. Office space at OneBKC in Mumbais Bandra Kurla Complex, for instance, is now being sold at R31,000 per sq ft, up from R27,000 per sq ft a couple of months ago. Much of this is a scarcity premium, considering that theres little quality office space in the area and OneBKC is close to completion.

But corporates may pay up. Sources say firms like Lupin Laboratories and Novartis are scouting for properties as are the GMR Group and United Phosphorus.

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And all of them want to be in Mumbais alternative business district. Indeed, demand for office space in BKC now estimated at an annual 6 lakh sq ft and tipped to keep growing while supply, for the next couple of years, is capped at around 12 lakh sq ft. Godrej BKC is among the complexes expected to be complete by end 2015 but the OneBKC property, belonging to Radius Developers with 15 lakh sq ft, should be ready before that. Ashish Shah, business head, Radius Developers, confirmed his firm has upped the price and claimed it is flooded with enquires from companies of all hues willing to both buy and lease.

Indeed, there has been a pick-up in office leases in the three months to September; theyre up a sharp 31% year-on-year at 80 lakh sq ft across the top six cities of Mumbai, Delhi, Bangalore, Hyderabad, Chennai and Pune, according to consultancy firm CBRE South Asia. Office space absorptions in Mumbai were up by 15% y-o-y. Between them Mumbai, Bangalore and the National Capital Region (NCR) attracted around 72% of the space. According to sources, prominent lessors were Deutsche Bank, which rented 1 lakh sq ft in Nirlon Knowledge Park in the western suburbs of Goregaon in Mumbai, and TCS, which leased 3.5 lakh sq ft space in Galaxy IT Park in Noida.

Consultants say e-commerce companies are turning out to big lessors though IT/ITeS firms remain the main demand drivers.

Bangalore and Hyderabad saw a large number of pre-commitments for under-construction properties from firms as new supply of office space offers large floor plates. Ravi Ahuja, executive director, Cushman and Wakefield India, said: Corporates have started taking decisions now, and consolidation and expansion of corporate firms is leading towards incremental demand for office space across India,