IT continues to drive real-estate prices

Bangalore July 3. The IT industry continues to drive real-estate prices in Bangalore.

While demand from "dot com" companies has dried up, the IT- enabled service companies, call centres and backoffice processing outfits still demand commercial space, according to a review by the international research consultancy, Knight Frank.

The demand for large buildings in the 50,000 to 1 lakh sq. ft. range from this sector has gone up.

The campus style of work environment for larger IT companies is also sought after with the State Government providing land with clear titles at reasonable rates, with amenities and other subsidies, the review noted. Intel took possession of a 2 lakh sq. ft. fully fitted, built-to-suit (BTS) building developed by the Prestige Group on Airport Road and bought this building at Rs. 4,400 per sq. ft.

Knight Frank expects prices for existing commercial property with smaller floor areas in the central business district around M.G. Road to decline. New buildings with high floor to ceiling height, larger floor area, more car parking facilities, and lower real-estate costs, are being demanded by new generation corporates, even if they are on the periphery of the City.

The built-to-suit developments with power backup, parking facility and low rental appeared to be the way forward for many companies. The BTS way benefited both corporates and developers.

The demand for such buildings is expected to be from companies looking to set up their backoffice operations, call centres, and other IT-enabled services.

The occupants in built-to-suit buildings can expect better deals and greater say in the buildings they are going to occupy. On the other hand, the developers face reduced risks as they have a ready client bringing in immediate cash flow. A BTS building can be built in eight to 10 months rather than the 16 to 18 months that it takes to build an average building.

Campus style office environments will take root among the larger IT firms, according to the Knight Frank review. More such developments are likely to be seen in Bangalore. A key role will have to be played by the State Government in maintaining the advantage it has in the IT sector over other States.

"What Bangalore lacks is adequate infrastructure," the review pointed out. "It is deficient in power and water which significantly enhances property outgoings. Secondly, transportation is inadequate when compared to other major cities in India."

It is clear that now it is up to the Government, the BMP, and the utility agencies to overcome the shortcomings if new business is to be attracted to Bangalore and for the real-estate scene to pick up again.

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