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IT sector boosts office space demand in suburbs

Office spaceMumbai- Increasing number of Information technology (IT) companies has been driving the office space demand in the prime cities. Particularly the demand for rental office spaces is rising in the peripheral areas of cities since the rental rates are comparatively low than city centric locations.

Consequently, commercial real estate developers are more into developing office spaces away from traditional commercial hubs of cities.

For instance, in Mumbai, the IT sector has surpassed the historically dominant financial services sector in office occupancy. As a result, office space expanded beyond South Mumbai, Bandra Kurla Complex and South Central Mumbai, reports real estate consultant Jones Lang LaSalle (JLL).

As per the recent report, in 2009, the Banking, Financial services and Insurance (BFSI) sector occupied 48 percent of ‘grade A’ office space which reduced to 21 percent by 2012. While the IT sector which had an occupancy rate of 15 percent in 2011 grew to 22 percent in 2012. The growth was driven by increasing number of IT companies, states the JLL report.

Market experts observe that ‘non-CBD’ (Central Business District) locations includes around 70 percent of Mumbai’s total office space and will have a major role in determining the performance of the city’s office market.

The National Capital Region (NCR) commercial market too shows similar kind of graph in terms of office space growth. Knight Frank’s recent report reveals that the share of occupancy of IT companies grew by 49 percent in the Oct-Dec 2012 quarter compared to 12 percent in the similar period of 2011 in the NCR region. The increase accounts for 0.66 million square feet of office space.

Gurgaon’s peripheral business district (PBD) is one of the most sought after destination in NCR, contributing nearly 43% of this supply. Most of the IT companies in Gurgaon are situated in DLF Cyber City. Some of the important companies that occupied office space in the December quarter include companies such as Microsoft Corp. India Pvt. Ltd, IBM India Pvt. Ltd and Hewitt Associates (India) Pvt. Ltd.

IT companies occupied 67% of office space in Bangalore in the December quarter, 75% in Pune and 80% in Hyderabad, states the Knight Frank report.

On the other hand, the demand for office space in many other prime cities in India has been restrained in the current fiscal owing to uncertain global economic scenario and slowdown in domestic growth. The demand for office space is expected to drop by 17.6% in fiscal 2013 from a year ago. But recovery is expected in the second half of the fiscal.

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