Sentiments in the Indian office market seem to be changing. A report by leading real estate advisor DTZ India finds that the central business districts in major cities of the country are losing their sheen. And peripheral areas are where the action will be.
About 80 per cent of the demand for office space is driven by the software sector. According to a report by DTZ India, these companies now seem to prefer the peripheral areas of the cities to traditional business districts. The report expects the peripheral areas in major cities to see significant additional supply of office space this year.
While Bangalore will see almost 11.5 million square feet of space addition, NCR and Chennai will add about 15 and 10 million square feet of office space respectively. The ever increasing demand for office space led to an over 100% jump in rentals in the CBDS of Mumbai and New Delhi in 2006. No wonder IT and ITES companies are now looking elsewhere.
But it is not just high rentals that are driving demand on the peripheries. Ankur Srivastava, MD, DTZ India, says, “The peripheral areas are primarily driven by the demand from IT and IT enabled services industries operating on their proximity. And they succeed on the basis of their proximity to the labour pool. The labour pool is available in the suburban and peripheral areas. Good quality real estate is available. The real estate offers them scalability and it comes at an affordable cost.”
The report says that though demand for quality office space will continue to grow by 30%-35% in 2007, the additional supply expected will help balance the demand-supply gap, and is also likely to keep rentals under check.
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