Personal Finance

In Bangalore, periphery is the new centre

Anil Urs | Updated on July 02, 2011 Published on July 02, 2011

New space: Whitefield has seen several office properties coming up of late.

Lack of quality supply in the extended business district has made peripheral markets attractive.

There has been an increasing trend of companies in Bangalore to relocate to peripheral markets such as Outer Ring Road (ORR) and Whitefield due to ready availability of large space.

Whitefield and ORR areas are favoured destinations for long-term commitments by corporate houses. This development is coming at a time when the corporates are looking at long-term expansion or to pursue their consolidation plans.

Prominent companies moving in to peripheral areas are TCS, Cognizant Technologies, NDS, Huawei Technologies and Infinite Computer Solutions.

The peripheral market witnessed closure of a few mid-sized transactions with absorption estimated at 700,000 sq.ft during the first quarter of 2011. Electronic City and Hosur Road witnessed only marginal leasing activity during the quarter. International property consultant CB Richard Ellis attributes this movement to peripheral markets to lack of Grade-A supply in the extended business district (EBD).

EBD areas are Indiranagar, Koramangala, Old Madras Road, CV Raman Nagar, Bannergatta Road, JP Nagar, Jayanagar and Mysore Road.

The peripheral areas saw almost 1.6 million sq.ft of fresh IT space. The ORR market saw absorption of almost 620,000 sq.ft. As most projects near completion or under construction have registered healthy pre-commitments on the ORR stretch, rentals have shot up 4-5 per cent. With all these activities happening in EBD absorption stood at 250,000 sq.ft.

“The lack of Grade-A supply in the EBD led to increase in rental values by almost 9 per cent on a quarter on quarter basis, predominantly in the second generation office space,” said a report by property analyst CB Richard Ellis.

With no fresh supply in the Extended Business District in the near term, most companies have plan to relocate to peripheral markets. “Technology sectors, the major driver for absorption in Bangalore, continue their location and expansion in their chosen clusters of Outer Ring Road and Whitefield. However, most of the larger commitments have come about in the Special Economic Zone developments in these locations. A number of other sectors continue to show good absorption and have chosen to make commitments in the various parts of CBD (Central Business District) and the various secondary business district (SBD) of the city,” said Mr Shivaram Kumar Malakala, Executive Director, Habitat Ventures.

As for the other areas, lack of supply in the south Bangalore market of Bannergatta Road, JP Nagar, Jayanagar and Mysore Road continues to pose as a deterrent for occupiers planning to set up their operations in this location. “Office space development in this market is limited to Grade-B buildings with no new supply of Grade-A space expected in the near future. Absorption was recorded at around 120,000 sq.ft; rental values appreciated by almost 14 per cent on a quarter on quarter basis,” explains CB Richard Ellis.

The CBD of MG Road, Richmond Road, Residency Road and Lavelle Road witnessed an increase in number of enquiries from corporate houses preferring to expand within the CBD.

Prominent companies moving in to CBD/SBD areas are Swiss Re and Thomson Reuters.

While the CBD market did not witness infusion of any new supply, a large number of mid-sized transactions by companies were finalised with absorption recorded at around 180,000 sq.ft (primarily in second generation space). Also, due to increase in demand and limited availability of Grade-A supply or expected to be made available during the current year, rental values increased by almost 15 per cent on a quarter on quarter basis.

The north Bangalore market is an attractive destination for corporate occupiers. However, it suffers from lack of quality space which hampers leasing activity in this market. High demand amid low supply led to an increase in rental values by almost 14 per cent quarter on quarter basis.

Published on July 02, 2011

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