Financial Daily from THE HINDU group of publications
Thursday, Sep 23, 2004
Industry & Economy
Real Estate & Construction
`Bangalore leads in office space development'
Bangalore , Sept. 22
THE southern region of the country comprises about 60 per cent of the pan-India office space market and about 10 million sq ft of office had been developed during 2003.
Primarily represented by Bangalore, Chennai and Hyderabad, the cities offer an overall cost advantage with relatively lower real estate costs thus providing a wider choice of real estate options and multiple locations for prospective occupiers as compared to the limited location options for cheap space in Delhi and Mumbai.
While Bangalore led the development volumes, Hyderabad has witnessed increased interest during the last couple of years and Chennai is currently on the list of preferred locations.
The IT/ITES continue to be the pivot around which the office real estate absorption is based, with more than 90 per cent demand originating from the IT and BPO sectors. In terms of demand, 90,000 sq ft of spade has already been absorbed in the Chennai office market during the first half of 2004, the figure is 1.8 million sq ft for the same period in Bangalore.
Of the total 10 million sq ft, Bangalore alone contributed about 50 per cent of the space and the city was expected to add a similar volume of development during the current year. The potential annual demand of IT space in Chennai is expected to be about two million sq ft during the next two years.
The fact that the large volume of speculative space (not pre-leased) was currently put out in these markets, underlined the confidence that the developers had in the sustained growth of the market in future. However, the key issue of infrastructure, lack or slow pace of development, was affecting the competitiveness of the region with respect to the other locations within the country, says a CII study paper.
In its comparative analysis about the three key cities in the region, the study pointed out that transport efficiency and reach including intra-city roads, public transport (light urban railway system or MRTS) State highways and airports needs immediate attention.
Hyderabad had the advantage of a small urban spread and thus commuting through public transport was not a major problem, but the inter-city and international connectivity was of concern. Chennai had by far the best transport infrastructure with an international airport and MRTS. Bangalore having developed at a scorching pace, was confronted with a strain on its transport infrastructure with traffic congestion and increasing commuter time.
Power availability and quality was of concern in both Bangalore and Hyderabad with the most of the occupiers resorting to private generation. This resulted in cost disadvantage in the two cities.
Suggesting that augmenting the MRTS would improve the internal connectivity considerably in Hyderabad, the delay in the international airport projects was a matter of concern in both Hyderabad and Bangalore.
The proposed three-level ring road network in Hyderabad, supplemented with the light railway and bus transport service would serve to improve access from peripheral residential zone and improve linkages, reducing travel time to prominent commercial locators.
In Chennai, the State Government should expedite the implementation of a new master plan for the Chennai Metropolitan Area and also look at reclassifying and allotting land at competitive rates to local, national and international developers on the IT highway to create mixed use facilities.
The Government should also take steps in improving the infrastructure in Ambattur and Guindy industrial estates to attract IT companies.
Mount Poonnmallee Road, Pallavaram and Velachery, given the nearness to middle income catchments zones and airport, should also be positioned as alternate IT corridors, said the CII study.
The study said with the proposed conversion of the IT highway into a six-lane expressway connecting Madhya Kailash and Siruseri expected to be completed by the second quarter of 2005, the travel time between Tidel Park and Siruseri would get reduced considerably.
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