Office space absorption in Bengaluru inched up slightly in the recently concluded quarter compared to the same period last year helped by an increase in leased out space in Whitefield, the hub for IT companies. But it was also a quarter devoid of any big bang leases from major multi-national companies.
Gross absorption increased to 2.7 million square feet for the second quarter ended September 30, from 2.3 million sq ft a year earlier, according to independent property consultancy CBRE. Even during the first quarter, the amount of space leased stood at 2.3 million. Gross absorption includes net absorption and property under development, which will be delivered within 4-6 quarters.
A majority of office space acquisitions took place in the micro market of Whitefield, located in the eastern part of the city, due to more vacancies compared to Outer Ring Road (ORR). The Outer Ring Road sub-market is slowly getting saturated and witnessing a vacancy of just 2%, due to good connectivity with surrounding residential areas.
"Overall supply in Bengaluru continues to remain a constraint but at the same time there are vacancies in micro markets such as Whitefield and Electronic City," Ram Chandnani, managing director, advisory and transaction services, CBRE India, said.
During the reported quarter, the biggest space was taken up by Tata Consultancy Services (TCS), India's largest software services exporter by revenue. TCS took up 0.55 million sqft space in Whitefield, followed by US financial services company, Broad ridge Financial which leased 0.15 million. Home improvement company Lowe's, which has its Innovation Labs, earlier this year in Bengaluru, took up 0.12 million sq ft space in Embassy Manyata Tech Park.
Chandnani explained though the office space demand in Bengaluru remained robust, it is unlikely to hit the record highs of 2015 and 2014, when the city saw absorption of 12.2 million sq ft and 11.3 million sq ft respectively. The jump in the last two years was mainly aided by huge commitments from e-commerce companies such as Flipkart and Amazon and cab aggregator Ola.
Barring Lowe's, the period lacked the glitter of the previous quarter, which saw iPhone maker Apple and Diageo, world's largest drink's maker, making their entry in a city, already home to R&D centres of MNCs such as US oil major Exxon Mobil, the world's largest retailer Wal-Mart and lingerie retailer Victoria's Secret.
RMZ Corp, one of the biggest developers of office parks in the country, said it leased about 1 million sq ft for the quarter ended September and demand remained steady. "Outer Ring Road continues to have a space crunch though it is the most sought after place in the city. But developers are gearing up with fresh supplies in the next 18-24 months." Thirumal Govindraj, managing director leasing, RMZ said. The company signed a fresh lease of 0.25 million sq ft with State Street, one of the biggest custodian banks in the world in RMZ Eco world in the last quarter.