Rentals tend to equalise for CBD and suburban realty

BENGALURU | MUMBAI: Office demand in suburban locations or secondary business districts is outpacing that in the central business districts across India’s major markets.

Experts said the trend that began with Mumbai, with the shift in preference from Nariman Point to the Bandra-Kurla Complex over the past few years, has moved to other cities as well and started reflecting in the rentals commanded by these locations.

In Bengaluru, for instance, the rentals in the Outer Ring Road area are expected to catch up with the prevailing 75 a sq ft in the central business district by the end of this year.

In Mumbai, secondary locations such as the Bandra-Kurla Complex, Santacruz and Kalina are expected to command about Rs 250 a sq ft, higher than the Rs 222 in the central business district. “Larger buildings, improved connectivity and competitive rentals were some initial factors that led to relocation of prominent companies from central business districts to upcoming areas more than a decade ago,” said Karun Varma, managing director, Bengaluru at real estate services firm Cushman & Wakefield. “The lure of chea eld. “The lure of cheaper rentals, along with large office space led to companies relocating to these areas,” he said.

In Gurgaon’s central business district, for example, rentals in grade-A office buildings were just a fourth of that in Delhi in 2009.

This prompted many multinational corporations to set up offices in the suburban city. In Mumbai, monthly rentals were only slightly cheaper in Bandra-Kurla Complex, at Rs 240 a sq ft, compared to Rs 300 a sq ft in Nariman Point at that time.

A recent RICS and Cushman & Wakefield report on commercial real estate said that higher demand in alternative locations and newer buildings commanding higher rentals will steer the average weighted rentals in the secondary business districts of Bengaluru, Hyderabad and Mumbai.

While the average size of stock in central business districts in May was about 63,900 sq ft, in suburban locations it was more than 3.5 times higher at 224,400 sq ft.

After a dull 2013 and 2014, demand for office space rebounded in 2015 with heightened leasing activities.

Among the largest deals in the country, Novartis took 800,000 sq ft space on lease in Madhavpur in Hyderabad while Amazon India took 500,000 sq ft space in Bengaluru.

Credits ET Realty

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