Many areas in the CBD are witnessing strong demand from the ITITeS, e-commerce and BFSI sectors as well as from start-ups.
The Central Business District (CBD) is the heart of the city. It is the original commercial and retail high street nodal hub around which the city's growth fans out. In Bengaluru, the CBD comprises commercial hubs that have developed within a three-km radius of M G Road. The localities in this region include M G Road, Lavelle Road, Langford Road, Ulsoor Road, Residency Road, Richmond Road, Infantry Road, Cunningham Road, Brigade Road, Museum Road and Vittal Mallya Road.
Shrinivas Rao, CEO Asia Pacific, Vestian Global Workplace Services, elaborates on the client profile and the commercial market scenario here. "The CBD primarily houses international and domestic banks, and corporate sales marketing offices of manufacturing, BFSI and ITITeS firms. Additionally, a majority of the professional services firms and government consulates are located in this micro-market". Vestian Global's research analysis reveals that currently 12.30 million sqft of commercial space is operational in this micro-market, while 1.75 million sqft is under construction and set to be operational by 2018.
Strong commercial growth
According to research by Cushman and Wakefield, the commercial sector in Bengaluru has witnessed strong growth over the last few quarters with office absorption doubling in the first half of 2015. The first half of 2015 witnessed total net absorption of 6.90 million sqft, nearly 2.50 times the net absorption noted in the same period in 2014. The CBD has a total inventory of 10 million sqft as of June 30, 2015, with Grade-A accounting for a 33 percent share of this inventory. In the first half of 2015, the CBD off-CBD locations witnessed all-grades leasing activity of 2.19 lakh sqft, up from all-grades leasing activity of 2.12 lakh sqft in the same period last year.
Naveen Nandwani, Managing Director Bengaluru, Cushman and Wakefield, explains, "The CBD off-CBD locations house major banks, financial institutions, insurance companies, a few corporates and ITITeS companies. However, the limited availability of Grade-A offices has led to an increasing occupier preference for suburban and peripheral office markets. Although sustained demand from the IT sector for large Grade-A spaces has spurred commercial development in and around the Outer Ring Road (ORR) and Whitefield, a number of smaller occupiers may prefer to be located in CBD on account of the availability of smaller spaces in non-premium developments at reasonable rentals."
Space uptake and supply
According to Vestian's research analysis for August 2015, the sector-wise occupancy in the CBD region is skewed towards the ITITeS sector. ITITeS notches up 30 percent of space uptake in the CBD. Following close behind are the ecommerce, retail and healthcare sectors, taking up around 29 percent of commercial space. Manufacturing and professional services each occupy around 15 percent, with BFSI space occupancy at around 11 percent.
Naveen says, "As of the second quarter of 2015, over eight lakh sqft of new supply is under development in the CBD off-CBD micro-market, of which, close to 60 percent is Grade-A space. The weighted average asking rental in the micro-market ranges between Rs 65-100 per sqft per month. This, coupled with its central location and good connectivity from the suburbs, attracts occupier interest."
Market outlook
According to Shrinivas Rao, the CBD region is projected to witness nearly 1.75 million sqft of fresh supply within the next three years. "Around 46 percent of the present supply in this micro-market comprises Grade-A developments. Our analysis projects that demand from e-commerce and ITITeS firms is expected to keep the vacancy levels at 9-10 percent regardless of the new influx of supply in Grade-A space. Warm shell rentals in Grade-A buildings are expected to increase on account of limited operational stock. Strong demand from ITITeS, BFSI and start-ups is estimated to push Grade-A rentals in key areas of the CBD," he says.
Source: Magic Bricks
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