The office space market in Bengaluru—India’s biggest—faced the biggest threat from the Covid-19 lockdown. India’s equivalent of the Silicon Valley is home to software services providers, captive data centres and startups, businesses that were able to easily switch to work from home. Yet, the city’s premium commercial property landowners have weathered the threat so far.
A compilation of data for nine key micro-markets in Bengaluru— Outer Ring Road, Whitefield, CV Raman Nagar, Old Airport Road, Inner Ring Road, Old Madras Road, Koramangala, Vittal Mallya Road and Race Course Road—shows only a marginal increase in vacancies over the previous year. Demand held up in Grade-A commercial properties in these areas.
- Prominent office projects analysed—accounting for 52% of completed Grade A inventory and three upcoming projects, and one completed this year—had a 53% share of gross leasing activity recorded so far in 2020.
- Fresh leasing contributed 52% share followed by term renewals at 48%.
For most upmarket office locations, vacancy rose only marginally or remained the same. Prestige Trade Towers on Race Course Road, a premium commercial address in the city, for instance, has a vacancy at 4.2% in 2020—unchanged from 2019. Embassy Golf Links on Inner Ring Road, another premium location, saw vacancy rise to 4.6% this year compared to 2.4% a year ago.
Moreover, vacancies in many buildings in the city rose in 2020 over last year on account capacity addition, according to data from Cushman & Wakefield.
Although there have been exits in the second and third quarters of 2020, according to data, that number is less than fresh leases or term renewals for buildings.
A high percentage of startups let go of their offices, especially the ones operating out of flexi-offices to review and finalise their strategy to return to office, said Ramita Arora, managing director-Bengaluru for Cushman & Wakefield.
Among the companies that gave up office space include Ola, Dimension Data and Cyient.
Most of the fresh leases and renewals are long-term contracts with a minimum tenure of five years or more. Companies like Visa Inc., Wells Fargo & Co., IBM Corp., Google, Morgan Stanley and Genpact, among a few others, have either taken fresh leases or extended them during this period. Most of them leased space on the Outer Ring Road, another key office destination in Bengaluru.
Although the transaction activity has been slow, vacancies continue to be very low, according to Arora. “Some of the vacancies will be reflected only in the coming two quarters,” she said. “This is because companies have given exit notices and actual exits will happen in the first two quarters of the calendar year 2021.”
However, these vacancies will be less than 10% and won’t have a major impact on the rent in the overall market, she said. “Companies, however, are in discussion stage and deciding on the best strategy-flexible timings, neighbourhood offices, staggered working hours etc.,” she said. “The clarity is expected only when all the employees start coming back to work.”