Employment opportunities to the tune of approximately four to five lakh are expected to be generated within the next two years across the country’s leading cities. In case India’s economic growth accerelates to above 6% in 2015, more such opportunities may be expected. The IT/ITeS and allied services sectors are likely to account for a substantial chunk of this opportunity, followed by the banking, financial, services and insurance (BFSI) sectors; and distantly followed by research and consulting, pharmaceuticals, engineering and manufacturing, and telecommunications. According to CBRE Research, more than 70–80 million sq. ft. of fresh commercial office space is anticipated to become ready for possesion by 2015, most of which are planned and under-construction IT/ITeS spaces. Assuming about 60–65% absorption levels for this upcoming office space, approximately four to five lakh employment opportunities may be realistically anticipated within the next two years.
The three major metropolitan centers of Bangalore, the Delhi National Capital Region (NCR) and the Mumbai Metropolitan Region (MMR) are slated to account for nearly three quarters of this planned office space supply, with Bangalore and the NCR alone expected to contribute to more than half of this total expected employment opportunity by the end of 2015. Gurgaon and Noida are likely to attract the maximum number of these projects in the NCR; and quite a few micro-markets in Bangalore too are expected to follow suit. While the Outer Ring Road (ORR) stretch is anticipated to witness most of the supply set to hit Bangalore in the coming years, the rest of the city’s upcoming office space will come up in the North Bangalore area, followed by Whitefield and Electronic City. Bangalore has also crossed a milestone in its commercial office space development curve in 2013, by becoming the first office hub in India to have joined the global club for 100-million-sq.ft. office markets.
With major corporate decision makers across Europe having indicated an increased appetite for global expansion into Indian markets, this expansion of modern, investment-grade office stock in the main cities of India will go a long way in meeting upcoming opportunities. According to CBRE’s, European Occupier Survey 2013/2014, nearly 50% of corporate occupiers responding to the survey named India (double the figure from 2012–13 at 24%) as their destination of choice—beating China as a preferred destination (42% in 2013-14, down from 60% in 2012–13). The major reasons behind such positive sentiments would appear to be rapid population growth and gradually recovering economic prospects, coupled with increasing transparency and improving infrastructure. These factors seem to be removing many of the traditional barriers to entry into Indian markets.
The opportunities presented by economic growth in India may now be sufficient to overcome some of the longstanding barriers—governance, infrastructure, bureaucracy, and lack of transparency—that have inhibited inward investment. India has already attracted a large number of occupiers from a range of sectors, including financial and business services, media, technology and telecommunications, and pharmaceuticals. This has been supported by a general process of de-regulation and a range of specific government initiatives designed to attract foreign investment, such as relaxation of rules on foreign ownership, streamlining of the development process, and promotion of a range of high-tech growth industries. Improved international and domestic infrastructure connections have supported growth in a number of cities, including Mumbai’s financial cluster and the economic hub of the NCR. Growth in the technology sector has particularly contributed to this phenomenon. With the US economy on a gradual recovery graph, improving prospects could also translate into more back-office opportunities for India.
India’s commercial office market across leading cities has been headed towards a mature growth curve. An emerging trend has seen various off-shore funds and key institutional players turning to investments in core commercial assets. Private equity firms, pension funds and real estate investment trusts (REITS) own close to 80% or more of the office space market in most mature markets around the world. With the possibility of Indian REITs taking off, and India’s core commercial assets yielding comparatively high rentals among emerging markets, it would seem that India is presently poised to make the best of the opportunity headed its way.
Anshuman Magazine, CMD, CBRE South Asia Pvt. Ltd.