TMT Sector Accounted for 19% and 48% of Grade A Office Space in Mumbai and Bengaluru, Respectively in 2018: Colliers International India
GURUGRAM, India, March 12, 2019 /PRNewswire/ —
Asian CBD areas have historically been dominated by finance. However, technology, media and telecoms (TMT) groups and flexible workspace operators were key drivers of demand over 2017-2018. As per Colliers Research, the TMT groups now occupy about 18% of prime office space in Asian CBDs, and flexible workspace 5%. Growth in these sectors may slow, but is unlikely to reverse. In addition to changing occupier profiles, patterns of workplace organisation and design are evolving. Occupiers in general increasingly value flexibility, efficiency of space use and ambient experience.
“With the growth of flexible workspaces absorption, investors will have to evaluate the strengths/ durations of the underlying leases that these operators are signing with tenants to assess risks that they could inherit in case there is a slowdown in the tech/start-up space. Currently there is a cap rate premium being provided for assets which have some of the space occupied by any Tier I flexible space providers and we see that continuing in the immediate future,” says Joe Verghese, Managing Director at Colliers International India.
Not only are occupier profiles changing, but so too are patterns of workplace organisation and design. Offices are increasingly laid out on open-plan activity-based or agile working principles, while occupiers in general are demanding flexibility, efficiency of space use and enhanced ambient experience as tools to staff retention for a more mobile and typically younger workforce. As per Colliers Research, the strategies for building design and management should include a flexible workspace element, as in the ‘flex and core’ model. Further, it is advised flexibility over terms in dealings with tenants, specifically, owners may need to accept shorter lease lengths and invest more in design and fit-out of internal space.
Such investment ought to pay off, since greater attention to environment and experience should inspire tenants and staff to stay. The owners need to be more actively involved in building management. This situation should provide further impetus to value-added investment strategies.
Finance and professional services have traditionally been the dominant occupier sectors in the CBDs of major Asian cities. Finance alone still represents 30-50% of total occupation of prime office space in most Asian CBD areas outside India and the Philippines where technology is more important. However, patterns of space occupation are changing, with the technology, media and telecoms (TMT) and flexible workspace sectors the key drivers of new demand in many cities over 2017 and 2018.
Technology and media has emerged as a major occupier sector in India. The TMT sector accounted for between about 19% of Grade A office space in Mumbai and 48% in Bengaluru at end-2018.
Flexible workspace operators have made particular inroads into Indian urban markets. As per Colliers Research, the sector accounts for 15% of total Grade A office space in prime areas of Bengaluru, and for 12% in the NCR agglomeration.
About Colliers International Group Inc.
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