Office space Demand and Supply and the Factors affecting growth
Expansion far beyond expectations:
The silicon city of Bangalore and one of the commercial hubs of India has outgrown the expectations of city planners. There has been constant demand for both residential and commercial properties. There was a time when commercial space was restricted to certain areas like the Majestic, Commercial Street, MG Road and Brigade Road and so on. But, with the expansion of the city, new extensions or colonies have been added.
Naturally, the commercial activities have spread to these new areas. As a result, even in these new colonies or extensions there has been constant demand for commercial properties. Interestingly, encouraged by the demand for commercial properties, even some of the upscale residential areas like the Sadashivanagar is slowly getting converted into commercial properties; although in most of the cases unauthorized.
Considerable gap between demand and supply of commercial spaces:
A recent study indicates imbalance between the demand and supply for commercial properties. With new business ventures being set up at Bangalore, the demand for commercial properties has shot up considerably. Interestingly, in some of the business areas few property owners prefer to keep the property vacant for a few months only in anticipation for higher rental. The study further point out that the gap between supply and demand of commercial properties is very much higher.
The study further states if the present trend continues; the demand for Plug and Play commercial spaces will grow further, but the supply could remain static or move at a slower pace. As a result of this uneven balance between supply and demand, the value of commercial properties would grow rapidly. In such a scenario, experts fear that business houses may not venture to set up their business.
A sketch of demand and supply:
The study further reveals that in Bangalore the supply of commercial space stood at 112 million square feet, whereas the demand was over 118 million square feet. More than 70% of the available space has been taken by IT and other electronic industries. Some of the medium scale industries and business houses took the lion’s share of the remaining 30% and leaving a meager area for small scale business houses.
Of course, new residential colonies are being added to the city; but the zonal regulations of the Bangalore Development Authority (BDA) reserve only about 5% of the area in such new layouts for commercial activities which very much is insufficient to meet the present demand.
Lack of political will:
Successive governments in the state of Karnataka have been making an ardent effort to reserve some portion of the land exclusively for commercial activities. But, due to procedural delays and political will this remains a distant dream. In order to get over the situation, the government is also allowing high rise buildings in commercial places. But, that will not be enough to balance the demand and supply position. Experts argue that a viable approach would be to allow some of the residential areas to be converted into commercial space and speed up the process of setting up of exclusive areas for commercial activities.