Demand for commercial, space to increase in 2011: study

Bangalore is likely to witness a robust demand in commercial and retail space in the present calender year on the back of higher economic activity.

According to a study of real estate research firm Jones Lang LaSalle India, the city is likely to absorb about 7.1 million sq ft of office space by 2011 against a supply of 7 million sq ft in this period.

“A majority of the expected absorption is likely to take place in the secondary and Whitefield micro-markets,” Abishek Kiran Gupta, head-research and REIS, JLLM said.

In the meantime, the office market has witnessed a total transaction of 2.77 million sq ft in the first quarter of CY10, which is 7.36 per cent higher than the previous quarter. The total net absorption in the city was 958,091 sq ft, of which the central business district (CBD) and others accounted for 18 per cent of the absorption during this period.

Some of the key transactions during this period are Math Works leasing a 10,076 sq ft on Ulsoor Road, Impetus Leasing 20,000 sq ft on the Outer Ring Road among others. In the rental space, the average rent for office space in the CBD increased to Rs 78 per sq ft from Rs 76 sq ft in the first quarter of CY10. Similarly, the retail space is expected to see a momentum during the present calender year.

“Demand is expected to gain momentum and the total absorption in 2011 is likely to be about 2.31 million sq ft against a supply of 3.3 million sq ft,” the report said.

However, the report said vacancy rate was expected to rise from 5.8 per cent in 2010 to 16.4 per cent in 2011.

According to JLLM, the retail market absorbed 200,000 sq ft of retail mall space during the first quarter of CY11. ‘The high streets of Indiranagar, Koramangala, Whitefield, BEL Road and Old Madras Road accounted for 277,995 sq ft of the leasing activity indicating a surge in demand in retail space,” the report said.

Vacancy has also fallen to 5.5 per cent in the first quarter from 5.8 per cent in the last quarter. Some of the deals during this period are Pantaloons leasing 20,000 sq ft, Costa Coffee leasing 3,000 sq ft among others. Referring to retail rentals, the report said rental and capital values across micro-markets of Bangalore were expected to rise in 2011.

“We forecast rental values in the prime city area to reach Rs 184 per sq ft per month by the end of 2011,” the report said.

The appreciation in rental and capital values is anticipated in the prime city due to the lack of supply in the pipeline to meet growing demand, he added.