Uptick in Commercial Real Estate: Are these signs of coming boom in the real estate market?
Year 2014 has been very disappointing for the Indian Real Estate when it comes to residential segment. The new government and its supportive policies brought about a sense of optimism in the market. But this optimism could not lift sagging sales for developers.
But the same is not true for commercial real estate as in the second half of 2014, commercial real estate market experienced a substantial boom. As compared to 2013, the office space absorption rose by 10 percent. In the October-December segment, the total corporate space absorption was more than 9 million sq. ft., which was the highest quarterly increase over the past three years. The commercial real estate market was dominated by IT/ITeS, financial and banking services. Other sectors include telecommunication, engineering, manufacturing, construction, pharmaceuticals and healthcare.
Bangalore and NCR are the two markets that experienced the highest increase in office space absorption. Let us learn about these two markets in detail:
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Commercial Real Estate in Bangalore
Accounting for 37 percent of the total 33 million sq. ft., Bangalore experienced the highest commercial realty upsurge. Set to offer 1 million sq. ft. of office space to American tech MNCs like SanDisk, [24]7 and Adobe, Prestige Group is leading the commercial real estate in Bangalore. [24]7 , a front runner amongst outsourcing firms, is buying 4 lac sq. ft. of office space at Prestige Tech Park, located along the IT corridor of Sarjapur-Marathahalli Outer Ring Road. Adobe Systems is also buying 2 lac sq. ft. in the same campus. These office spaces offer build-to-suit models for these companies. However, instead of acquiring a land parcel or buying an office space, some companies prefer to lease office spaces. Prestige's latest annual report shows that it leased 9.39 million sq. ft. of office spaces in South India. IBM, Capgemini and Accenture are among the top commercial leased occupants.
This growth in corporate activities from global as well as domestic companies indicates that Bangalore will continue to see the highest office absorption in 2015 too. This will lead to an increase in the job opportunities which, in turn, will fuel Bangalore's residential property market. Bellandur, Kempapura, Koramangala, HSR Layout and Harlur are some of the residential areas around the location of Prestige Tech Park. The under construction commercial properties in North Bangalore will also contribute to residential demands along the stretch from Hebbal to Bellary Road. Other than its close proximity to job locations, demand is also driven due to the proposed metro rail connectivity and the Peripheral Ring Road (PRR) .
Commercial Real Estate in NCR
Accounting for 24%, NCR stood second on the list of commercial real estate absorption in 2014. Showing healthy levels of office space absorption, Gurgaon still stands as the most favored destination by commercial property buyers. However, Noida has also received good demand in under construction commercial assets, driven mainly by the IT sector. The assured returns schemes and pre-launch discounts during and post Diwali also contributed a lot towards reviving the sentiments in the commercial real estate market of NCR. Recently, TCS was in the news for leasing 9,20,000 sq. ft. of office space in NCR. It has taken 5,00,000 sq. ft. in Gurgaon from international builder Hines and 4,20,000 sq. ft. in a building in Noida which is owned by Infrastructure Development Finance Company (IDFC) .
Locations like Noida Expressway, Greater Noida and Greater Noida West have a number of upcoming commercial as well as residential properties. Infrastructure development across the twin cities and well-developed social infrastructure make these localities preferable for investment. A good deal of commercial real estate is also expected to come along the belts of New Gurgaon and Dwarka Expressway.
The boom in the commercial realty in different parts of the country is a clear indication of reviving sentiments among the buyers and investors. And this is surely a sign of upcoming boom in the residential real estate market.
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