Bangalore may witness construction boom for next three years

20.5mn sft of office space under construction

Bangalore is likely to witness the construction boom for the next three years with an estimated 20.5 million square feet of office space under construction and scheduled to be delivered by 2008-end.

According to international property consultants Knight Frank Research, of this huge office space supply, about 10.5 million square feet are to be ready this year while the completion of the remaining 10 million square feet will be spread over 2007 and 2008.

This new office space supply is skewed towards suburban and peripheral locations catering mainly to IT/ITeS companies.

There is no waning of interest in the city despite the issues like crippling infrastructure, rising real estate prices and increasing competition from neighbouring cities of Chennai and Hyderabad.

The city is expected to witness vigorous leasing activity this year, in line with the previous years, said Knight Frank Research.

The present vacancy rates for office space across micro-markets in Bangalore are less than 5 per cent. A reason for the low and steady decline of vacancy rates is the present supply situation prevailing in the central business district (CBD) and various micro-markets of the city.

"The absorption levels have increased significantly over the last few years, leading to lower vacancies across the office micro-markets in the city," it said.

Office space rentals in the city, which had been relatively stable in 2005, has been registering an upward movement this year. This is a result of the CBD as well as the suburban areas witnessing a sharp rise in corporate demand.

According to Knight Frank Research, over the last one year, rentals in the CBD and off-CBD locations witnessed an appreciation of 10-20 per cent, whereas the increase in the suburban and peripheral locations was 5-15 per cent.

The quoted rentals in the CBD of M G Road are in the range of Rs 53-58 per square feet per month while those in the off-CBD locations of Cunningham Road and Richmond Road are in the range of Rs 45-50 per square feet per month. In suburban locations like Indiranagar and Koramangala, present rents have remained stable since 2005 and are reported to be in the range of Rs 35-38 per square feet per month.

In peripheral locations like Electronic City, Hosur Road, and Bannerghatta Road, the present rents are in the range of Rs 22-28 square feet per month.

Contrary to the trend prevailing elsewhere in the city, rentals in Whitefield underwent a correction in 2005-end by 10-15 per cent due to excess supply.