Commercial realty gets new lease of life

Commercial realty gets new lease of life
The Economic Times, June 25, 2009, Page 5

Ravi Teja Sharma NEW DELHI

AFTER months of inactivity, the commercial office space market is starting to stir. A number of larger leases are happening across the major cities. Last few months have seen demand for small office spaces in the 5,000-15,000 sqft range. But May onwards, lease deals of the larger kind have started to happen. In Gurgaon, new telecom player Telenor recently closed a deal for 50,000 sq ft on Golf Course Road. Samsung has signed up for 66,000 sq ft in Noida while KPMG has closed a deal for 100,000 sq ft in Mumbai’s Lower Parel area and Wipro has leased similar space in Powai. In Hyderabad, GE has closed a deal for 60,000 sq ft in Gachibowli. “A healthy commercial office sector is an indicator for jobs getting created which in-turn facilitates growth of other segments of real estate,” says Vivek Dahiya, CEO of property consultancy GenReal.

There are many other large companies like Reckitt Benckiser and HP which are in the market at the moment looking for large spaces to lease. In the south, First Source and Amazon.com have both leased 100,000 sq ft of space each on Chennai’s OMR. Barclays Shared Services has leased 100,000 sq ft in Chennai’s Guindy area. “The last 2 months have seen quite a bit of activity,” says Kaustuv Roy, executive director at Cushman & Wakefield.

Jones Lang LaSalle Meghraj (JLLM) has seen a lot of movement at the HCC 247 Park building in Mumbai’s Vikhroli. “We are about to lease close to 200,000 sq ft of space in the 1.8 million sq ft complex to one tenant,” says Sanjay Dutt, CEO Business at JLLM.

As sentiments have started to improve in the Indian market, companies are coming out of their shell. “Many Indian corporates have been struggling with high rentals. Now, they are securing real estate space at lower cost,” says Dutt, emphasising that JLLM has seen a surge in transactions in the first 6 months of this year having done 40 transactions, though at comparatively lower rentals.

Most of the deals that have happened in the last 1-2 months are of the relocation and consolidation variety, says Dahiya. But now deals for fresh expansion too are starting to emerge. “Companies seem to be leasing additional space for expansion, which is a positive trend,” says Roy. Dutt explains that the fall in demand since late last year and the consequent increase in supply had put pressure on rentals. But in many places, supply is still limited.