Real estate news on Office space demand hits a high after 2014 slump in Kolkata

Commercial Properties, Price Trends, Real Estate services, Kolkata, Cushman & Wakefield
Posted on Jul 09, 2015

KOLKATA: After a rather trying 2014 when a slump in lease-and-rental market kept newly built plug-and-play offices vacant, a steady offtake in Salt Lake Sector V and New Town in the first half of 2015 has provided fresh impetus to the realty business.

Companies have finalized deals for over 6.27 lakh sq ft in the first five months of 2015. Among the firms that have picked up big chunks of office space include Tractor India, British Telecom, Reliance Jio, Siemens VIA Tech, Samsung, NIIT, Bandhan and Canon.

"It is still early days but the slump appears to be over. The steady demand from prospective occupiers and quantum jump in inquiries is a sure sign of revival. We are confident that over 1 million sq ft of office space will be leased in Sector V and New Town this year," said realty firm Jones Lang Lasalle managing director (Kolkata) Surekha Bihani.

That is a huge fillip for the market that was in the dumps last year with only 1.5 lakh sq ft in new transactions. The rest 5.5 lakh sq ft comprised pre-committed leases of CTS, TCS and Genpact following completion of Unitech Infospace.

Abhijit Das, the office director of eastern India at realty firm Cushman & Wakefield, is glad about the turnaround. "As the economic outlook improves, demand will pick up. Many companies had postponed their decisions in 2014. They will all queue up and hopefully conclude transactions this year," he said.

Mean office space consumption in Kolkata in the past decade has been around 1.5 million sq ft a year with the peak in 2007 when 2.7 lakh sq ft was leased. The Tata Motors Singur project swing had provided the traction for telecom, IT/ITeS and banking, financial services and insurance (BFSI) firms. Just when it looked rosy, the industry was hit by the Lehman Brothers bankruptcy. The dramatic relocation of the Nano plant to Sanand in Gujarat compounded the problem in Bengal as positivity evaporated.

According to industry figures, offtake in office lease was 1.5 million sq ft in 2012. Cognizant and TCS together absorbed more than 0.9 million sq ft that year with Accenture, Schneider, NIIT, Anshian Software, BMA and Bajaj Finance making up the rest. In 2013, the figure declined to 1.3 million sq ft of which 0.5 million sq ft was for new transactions that included Reliance Jio, PwC, KPMG, Jacobs Engineering and British Telecom. The next year witnessed a 50% decline in fresh lease with only 0.15 million in new transactions.

The situation has turned around this year. Apart from the 0.63 million sq ft that has already been sealed, negotiations are underway with companies like Bentley, Oracle and others for 0.5 million sq ft office space.

"The bonhomie between Prime Minister Narendra Modi and chief minister Mamata Banerjee during the former's Kolkata visit and the subsequent trip to Dhaka by both has sent an extremely positive signal. If Mamata agrees to Special Economic Zone and gets Infosys, it will be a major fillip as several other companies will make a beeline for Sector V and New Town," said Bihani, pointing to how Maruti Suzuki and Ford followed Tata Motors to Sanand.

At present, there is a 26% vacancy in the office space market with 3.5-4 million sq ft ready but unoccupied. Ideally, the vacancy should be below 10%.

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