Is commercial space driving real estate?
Source: Hindustan Times
This week, we try to dispel some myths regarding commercial real estate by answering some frequently asked questions.
How well is commercial space doing vis-a-vis the other real estate sectors?
The market for office space in India has witnessed a compounded annual growth in excess of 30 per cent over the past seven to eight years. The growth has been highest in the met-ros, and there is an overall annual addition of approximately 58 million square feet of office space.
Is commercial space the primary driver? Does retail count in it?
For all practical purposes, retail counts as commercial space - meaning that it is used for commercial purposes, and that a different set of parameters from those that apply to residential space comes into play. However, the IT and IT-enabled services industry does lay claim to a pretty significant chunk of the overall demand. Retail, in the form of shopping malls and multiplexes falls in a comparable league.
There is also a huge demand for township-related spaces, owing to the benefits attached to such projects.
In which cities have office properties seen the highest appreciation on a year-on-year basis?
The cities where real estate prices have risen most sharply are metropolises such as Delhi, Chennai, Bangalore, and Mumbai. They almost doubled over the last three years. In fact, the rates for commercial space have nearly doubled in these cities over the past three years.
With such an onus on the IT/ITeS sector, do you feel that the international demand for such spaces is sustainable? One keeps reading of the fact that Indian IT/ITeS infrastructure is NOT among the best in the world. Indian IT/ITeS space is gearing up to meet global standards, and each year sees further improvement. At the moment, however, there are certainly problems with communication infrastructure in many instances.
The Indian data communication infrastructure does not yet match up to global standards - it is far from cost-effective and there is not enough going round. The problem lies in the fact that there is an institutional stranglehold on Indian telecommunications. The Internet cannot yet deliver in India , what it does in more advanced countries. This numbers among the reasons why certain international companies are still cautious in their inquiries for IT/ITeS space in India.
For those who intend to invest in office space in any of the major cities - what are the prevailing capital and rental values in each of them?
The rates in Chennai range from the highest in Radhakrishnan Sallai at Rs. 12,000-14,000/sq, ft. to the lowest at Ambattur at Rs. 3,000-4,000. In Bangalore, they range from MG Road at Rs. 9,000-15,000 to Rs. 2,000-5,000 at White-field. In Mumbai, they range from Rs. 25,000-55,000 at Cuffe Parade to Rs. 7,000-17,000 at Kalbadevi. In Kolkata, the range would be from Rs. 7,000-15,000 at Park Street tq Rs. 3,000-5,000 on Dum Dum Road.
One can roughly arrive at the annual rental rates for any sector by dividing the capital values by 100.
This week, we try to dispel some myths regarding commercial real estate by answering some frequently asked questions.
How well is commercial space doing vis-a-vis the other real estate sectors?
The market for office space in India has witnessed a compounded annual growth in excess of 30 per cent over the past seven to eight years. The growth has been highest in the met-ros, and there is an overall annual addition of approximately 58 million square feet of office space.
Is commercial space the primary driver? Does retail count in it?
For all practical purposes, retail counts as commercial space - meaning that it is used for commercial purposes, and that a different set of parameters from those that apply to residential space comes into play. However, the IT and IT-enabled services industry does lay claim to a pretty significant chunk of the overall demand. Retail, in the form of shopping malls and multiplexes falls in a comparable league.
There is also a huge demand for township-related spaces, owing to the benefits attached to such projects.
In which cities have office properties seen the highest appreciation on a year-on-year basis?
The cities where real estate prices have risen most sharply are metropolises such as Delhi, Chennai, Bangalore, and Mumbai. They almost doubled over the last three years. In fact, the rates for commercial space have nearly doubled in these cities over the past three years.
With such an onus on the IT/ITeS sector, do you feel that the international demand for such spaces is sustainable? One keeps reading of the fact that Indian IT/ITeS infrastructure is NOT among the best in the world. Indian IT/ITeS space is gearing up to meet global standards, and each year sees further improvement. At the moment, however, there are certainly problems with communication infrastructure in many instances.
The Indian data communication infrastructure does not yet match up to global standards - it is far from cost-effective and there is not enough going round. The problem lies in the fact that there is an institutional stranglehold on Indian telecommunications. The Internet cannot yet deliver in India , what it does in more advanced countries. This numbers among the reasons why certain international companies are still cautious in their inquiries for IT/ITeS space in India.
For those who intend to invest in office space in any of the major cities - what are the prevailing capital and rental values in each of them?
The rates in Chennai range from the highest in Radhakrishnan Sallai at Rs. 12,000-14,000/sq, ft. to the lowest at Ambattur at Rs. 3,000-4,000. In Bangalore, they range from MG Road at Rs. 9,000-15,000 to Rs. 2,000-5,000 at White-field. In Mumbai, they range from Rs. 25,000-55,000 at Cuffe Parade to Rs. 7,000-17,000 at Kalbadevi. In Kolkata, the range would be from Rs. 7,000-15,000 at Park Street tq Rs. 3,000-5,000 on Dum Dum Road.
One can roughly arrive at the annual rental rates for any sector by dividing the capital values by 100.
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