IT cos reserve grade-A office space in metros

HYDERABAD: Shortage of quality office space in big Indian cities has pushed up pre-commitments or reservations of property even before it is ready, among retail and technology giants by as much as 50% in the last six months, according to real estate consultants. IT companies like Apple, GEP Solutions, GCI and Here Solutions have made pre-commitments for grade A office space in Hyderabad, Mumbai and Bengaluru, while retailers like Amazon and Ikea are still scouting for suitable property, the consultants said.

According to property consultants, Pune saw the biggest jump in pre-commitments — from 26% in 2015 to 53% this year. In Mumbai, pre-commitments reaching 40% from 18%, while Hyderabad saw it touching 30% from 5% in 2015. An office in a prime location, developed by a reputed builder is considered “grade A”. Of the total office space supply in the country, 60-70% is considered to be grade A and is taken by top players in the IT and ITeS sectors.

In India, the demand-supply gap in this segment is expected to continue till early 2019. Ashutosh Limaye, head of research at JLL India, said low availability of quality office space could mean companies like Google and Microsoft, which had announced India expansion plans, may “opt for built-to-suit facility, which is an increasing trend with big companies seen in the market nowadays”. In a built-to-suit facility, a developer constructs an office as per the tenant’s specifications.

The property market saw a decline in fresh office space addition after the global financial crisis in 2008 till 2012, with most developers shifting focus to the residential and retail segments. Also, a large number of office space projects remained half-finished for want of funds to complete them. Owing to scarcity of quality office space in the city centres, technology companies like Google and Microsoft, who already have offices in Bengaluru and Hyderabad, have planned to set up their own facilities in these cities. Apple had gone in for pre-commitment of 0.25 million sq ft space in Hyderabad and some 40,000 sq ft in Bengaluru.

Ram Chandnani, managing director, Transaction Management Services, CBRE, said, “It is possible that the shortage of Grade A office space might also derail the process of space acquisition by these large players.”

Credits ET Realty

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