Office space demand sees sustained pickup across top cities

The demand for commercial real estate across the country is getting stronger and is witnessing a sustained momentum. The office space absorption across top 9 property markets has seen a sustained growth with total 28.3 million sq ft picked up during the first nine months of 2016, showed a Colliers International report.

Last year, commercial real estate in India registered a record absorption, and given the current momentum, this year is also headed in the same direction.

“The key office markets across India, especially in the south, continue to go from strength to strength in terms of office absorption, and with rents increasing significantly compared to prior years in certain micro markets. This is good news for owners and developers, but a challenge for office occupiers in many cases, as they face the prospect of higher rental rates and fewer options to choose from at least in terms of ready supply,” said George McKay, South Asia Director, Office & Integrated Services at Colliers International.

Colliers expects the leasing activity to pick up in the upcoming quarters and vacancies to decline in prime commercial corridors on the back of rising demand momentum, especially in Bengaluru, Pune and Hyderabad.

“Demand for commercial real estate has been increasing over the recent quarters as corporate entities consolidate and expand operations following a positive economic scenario. Demand for commercial real estate has been on the upswing across markets and we are experiencing it in our ongoing township projects in Panvel, Chennai and commercial tower in GIFT city near Ahmedabad,” said Niranjan Hiranandani, CMD, Hiranandani Communities.

“As I see it, business growth in India has been all about adopting global best practices, and I expect demand for commercial realty to keep growing through 2016 and 2017,” he said.

Expansion strategies by occupiers in ecommerce, healthcare and technology space are expected to increase in the overall occupancy levels. The growing office demand is expected to outstrip supply in technology sector driven markets such as Pune, Bengaluru, and Hyderabad. This should, therefore, lead to downward pressure on vacancies and an upward pressure on gross office rents in these markets, the report said. In contrast, traditional commercial markets such as Mumbai and NCR are likely to remain stable in terms of rents and vacancy due to a stable demand and supply scenario.

According to McKay of Colliers International, the demand for commercial spaces has resulted in land markets in the main cities becoming active as established and next generation developers are looking to replenish their land reserves to satisfy both existing and new client demand. During the first nine months of the year, occupier demand has focused on quality products in preferred micro markets in most of the cities, whereas startup and small-size companies showed an inclination towards serviced and co-working space.

Also, there has been an increased demand for leased out commercial assets in the market as indicated by a recent deal by Brookfield Asset Management to buy 4.5 million sq ft grade-A office and retail portfolio of Hiranandani Group in Mumbai's Powai suburb for $1billion.

“We expect an increase in office demand beckoned by improving Business Confidence Index which showed a 5.7% increase during April-July 2016. Other factors such as controlled inflation, falling interest rates indicate strong economic fundamentals,” Colliers said.

Source: PropertyatNeoDevelopers.Wordpress.Com

Shared office concept gaining popularity

Shared office spaces provide opportunities for many entrepreneurs to set up their own office at an early stage in their business in a cost effective manner.

In the last one decade, the concept of shared office space (also known as serviced offices or business centers) has become quite popular in the city. With entrepreneurship becoming big and start ups gaining momentum, there is a significant rise in the demand for such spaces in Chennai today.

A business center is a professionally managed commercial facility that offers end-to-end business infrastructure for short to medium-term duration. One can choose from a wide range of flexible options that suits one's needs. Based on specific requirements with respect to space and infrastructure, people can enjoy the advantage of customized, unbranded serviced offices. The business centers offer tenants a private, often glass-walled office on a floor, which is also occupied by other firms. Amenities such as cafeteria, boardrooms, meeting hall and reception are shared between the firms. An organization or an individual entrepreneur can rent a desk, if they don't need or can't afford a huge office of their own.

According to Satish Chander Narayanan, associate director, investments, Cushman & Wakefield, "It is increasingly becoming a preferred choice for companies that operate on a small scale. For large scale firms, these help as temporary solutions until they move into their permanent facility. Additionally, these spaces were high on demand during the recent floods and almost all business centers were packed with more than their usual capacity during the months of December, and January."

The occupancy rates are also high for this kind of property. Geethapriya R, general manager, Regus says, "People are looking at cost effective offices with good infrastructure, as real estate costs are escalating. Hence shared offices are being looked at as a viable option as it doesn't involve infrastructural cost and initial investment. The prospective clients range from start ups to Fortune 500 companies. There is surely a good demand in this office space category."

Sathish adds, "Over the last few years, a change is being seen in the attitude towards a serviced office, which initially posed a challenge for firms that were used to operating in their own office. With real estate costs going up, the need for a serviced office is seen as advantageous to a tenant who might be testing the waters with his new business. Besides, business centers have come in handy to provide long-term customized solutions for a number of firms who prefer operating from a serviced office than getting to invest in a full-fledged office space which would warrant them to invest in interiors and pay a significant amount as advance towards the premise. It isn't surprising that there are firms which have been operating in these serviced offices for more than five or six years, though they have grown substantially."

Puneet Murthika, senior business development executive, Lema Labs says, "Shared office spaces allow the company to enter a market without making a big financial commitment in an area that's often unfamiliar. At the same time, employees get a wonderful and professional working environment. We look for work spaces that allow us to innovate and motivate us to work better. Shared offices provide such a platform.”

The story is set to be better with demand rising from domestic and international players. "For firms that place a lot of importance on convenience and flexibility, these spaces are being much sought after. With flexible options like single seat occupancy, many start-ups are also preferring to go with a cost per head arrangement." says the spokesperson from Doxa Business Center.

"Features such as cost being calculated per workstation, convenience, ease of accessibility, flexibility, lesser planning, lower capital investment, hassle-free maintenance, professional reception services, high-speed broad band and single in voice attract entrepreneurs as they allow them to concentrate on their work. It also gives room for scalability. These are valued highly by emerging enterprises," adds Puneet.

Source: PropertyatNeoDevelopers.Wordpress.Com