Over 8.6 mn sft occupied in 2016; 2017 absorption forecasted to be 8 mn sq ft
Among the seven major office markets in India, Bengaluru continues to have the lowest vacancy levels at slightly less than 4%. In a trend led by the IT capital of India, how can other IT cities be far behind? Pune and Hyderabad too have vacancy levels at over 5% and 9% respectively.
Other cities follow these three: Chennai has around 11% vacancy levels; Mumbai has around 18%; Kolkata has more than 27% and Delhi-NCR has almost 31%. At a pan-India level, the average vacancy in commercial real estate stands at 15%, as of 4Q16.
From these figures, it is clear that IT hubs continue to see a good supply-demand equilibrium compared to other markets in the country. Developers in these IT hubs, especially Bengaluru and Pune, need to look into addressing the existing space crunch before the situation forces occupiers to consider some other cities. A few developers in Bengaluru have started advancing completion of their commercial projects in the city.
For a city that emerged at the top of 30 most dynamic cities globally in JLL’s City Momentum Index 2017, this data also demonstrates how occupier demand continues to remain strong and how there is need for commercial developers operating in Bengaluru to scale-up supply of quality office assets.
In terms of office stock too, Bengaluru is a clear winner among these three IT-dominated markets. The stock (in mn sft) here is far more than the stock of Pune and Hyderabad put together. In terms of IT stock too, Bengaluru leads the way although when it comes to quality options for occupiers, all three cities are still struggling in the same measure.
While talent availability along with the scale of its thriving tech industry and innovative start-ups have helped the city, it risks losing its ‘numero uno’ position as Bengaluru – like most other emerging cities – faces big challenges in ‘absorbing’ rapid growth in terms of its urban sprawl, lack of planning oversight, environmental degradation and a lack of suitable infrastructure. These are far from unique to Bengaluru but will need to be addressed and managed if it is to transform its momentum into longer-term success.