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Large office space occupiers in Bengaluru restructuring leases

Anil Urs Bengaluru | Updated on November 05, 2020 Published on November 05, 2020

The trend is expected to continue in 2021; many MNCs are looking to expand their footprint in Bengaluru, says Rahul Arora of JLL India

Large office space occupiers in Bengaluru are looking to restructure existing leases in an attempt to rationalise operational costs and achieve overall bottomline savings.

“This trend is expected to continue into 2021. However, the silver lining is a number of multinationals (with smaller or no footprint in India) carrying out a similar exercise, have started exploring opportunities to expand their footprint in Bengaluru,” said Rahul Arora, Managing Director (Bengaluru), JLL India.

“Overall outlook for the city remains positive with continued investor interest and the recent land deal by Godrej Fund Management and active scouting of office assets by Blackstone and Brookfield corroborate this view,” he added.

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Space absorption

On the space absorption front, Arora, quoting the JLL Research, said, “Bengaluru witnessed a net absorption of 2.7 million square feet of office space in the third (Q3) of calendar 2020, at par with the first quarter (Q1) of calendar 2020 levels.”

“The city saw new supply of 4.7 million square feet, compared to almost no additions in the previous quarter. Bengaluru is likely to witness an addition of one million square feet of office space in the next quarter, of which 70 per cent is pre-committed,” he added.

In Bengaluru, secondary business districts (SBDs), that is Outer Ring Road, and Banerghatta Road, accounted for two-thirds share of the total net absorption at 1.8 million square feet during the quarter. Leasing continued to be driven by IT/ITeS, followed by manufacturing/industrial and e-commerce sectors.

Within the city, the SBD sub-market saw the highest addition of 3.2 million square feet, followed by peripheral markets of Electronics City and Whitefield. Outer Ring Road continues to be the most sought after location with over 60 per cent share.

“It is imperative to note that prominent new supplies were completely pre-committed in the previous quarters. Coupled with the expected delays in construction, this could mean a supply crunch in the near future,” said Arora.

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While most technology firms still continue to have mass WFH, leasing momentum continues to strengthen with a number of new Request For Proposals (RFPs) that were released in the market in October 2020, he added.

The city vacancy increased to 6.5 per cent in Q3 2020 from 5.3 per cent in the previous quarter due to the combined impact of higher net supply infusion into the market and significant exits by select large occupiers. Overall rents saw a marginal rise of 1 per cent during the quarter on the back of higher occupancies.

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Published on November 05, 2020
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