Wednesday 12 August 2015

City suburbs outshine CBDs, account for 47% of the office stock in H1

City suburbs and peripheral areas have become the favoured location for companies to set up offices, with its share in the total office stock rising from 28% in 2004 to 47% in the first half of 2015, reports property consultancy JLL India.

Cheaper rents and lesser commute times for workforce are the major reason for such migration. Average rental values at peripheral business district (PBD) locations in the country were about 45-60% cheaper than CBD rentals, according to the report.

The availability of large contiguous land parcels and a high quality supply of buildings have been the other major factors that shaped this trend.

"IT/ITES companies, which were largely location-independent due to their offshore-onsite business model, are the trend-setters in this respect," said Anuj Puri, Chairman and Country Head at JLL India.

Central business district (CBD), on the other hand, has witnessed a severe attrition of occupiers and a decline in fresh supply of office space, with its share dropping from about 33% in 2004 to 10% in by June this year.

Secondary business districts (SBDs) in office stock has remained stable over the last several years at around 43% of the total office stock.

Gurgaon and Noida comprised over 80% of the lease volumes in 2015 - amongst the highest proportion of lease volumes registered by peripheral destinations in any city.

Mumbai has been an exception to the trend of office migration to PBD due to lack of supporting infrastructure and connectivity. However, the city witnessed a steady shift in office stock from prime CBD areas like Nariman Point to SBD precincts such as Lower Parel and Andheri-Kurla road. "An exodus of offices out of CBD was sparked by lack of quality office stock and the complicated ownership structure," Puri said.

Among other major cities, Bangalore and Hyderabad have witnessed a significant shift in office stock to PBD mainly due to dominance of IT/ITeS sectors. Pune and Chennai have witnessed greater interest in the SBD locations, which provide affordable alternatives for large occupiers looking for Grade-A properties. Kolkata has seen a rising interest in PBD precincts such as Rajarhat, which has witnessed a significant rise in office stock, driven primarily by the IT/ITES sector.

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