Bangalore’s commercial real estate market: How it fared amid COVID-19

[ecis2016.org] Amid COVID-19, Bangalore’s commercial real estate segment has shown positive signs. We have listed the progress of the city’s commercial real estate and what to consider when investing

With COVID-19 transforming the way offices and businesses operate, the immediate discussion has perhaps shifted to how remote working is the way to go. Does this mean that the demand for offices will fall and retail must go digital, completely? This is easier said than done and this is exactly why commerce in Bangalore has looked up, despite the Coronavirus impact on real estate and the lockdown. While sales were muted in both, the residential and commercial segments, industry experts are hopeful that within 12 to 18 months, the net absorption of commercial realty in Bangalore will look up, again.

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Bangalore enjoys a reputation as the IT hub of India and attracts budding entrepreneurs and start-ups. NRI interest in commercial real estate has been sizable too, thanks to the supply of office spaces, connectivity, amenities and even the residential real estate markets that have mushroomed close to these commercial areas. So, even as traffic weighs Bangaloreans down, there are many walk-to-work options, if you are willing to pay for it. However, it is important to understand some realities within the commercial market.

Data as of April 2020

Commercial realty in Bangalore amid COVID-19

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Net absorption remains low: Much of this can be blamed on the COVID-19 impact on commercial real estate. The pandemic disrupted activity in the commercial real estate market. Many deals that were at the negotiation stage were hard hit, with buyers asking for the removal of the lock-in period and even demanding rationalisation of rents. Net absorption as of April 2020 stood at 2.71 million sq ft as opposed to 4.27 million sq ft in April 2019.

Leases on hold: With a dramatic shift to the work-from-home concept, many start-ups and companies that were looking to occupy spaces, put their plans on hold till the investment climate became clearer. However, IT/ITeS and co-working occupiers led the game.

[ecis2016.org] Top IT companies in Bengaluru

Vacancy levels decrease: Even as we speak of the disruption caused by the Coronavirus, research says that vacancy levels are slightly lower when compared to last year. Bangalore is at a good place with a single-digit vacancy level of 5.6%, as of April 2020.

Demand for flexible spaces: Owing to the sudden shift in how businesses are operating today, as well as the popularity of remote working, demand for flexible spaces may surface in the mid-term, bringing down the overall cost, while focussing on employee satisfaction and overall sustainability of flexi-working options.

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Rentals increase: Rent of commercial property stood at Rs 70.94 per sq ft in April 2019. By the same time in 2020, it stood at Rs 75.64 per sq ft, an increase of 6.6%.

Investment in Bangalore’s commercial real estate 

Those looking at lucrative commercial investment opportunities, can consider the following:

• Office spaces: Leasing properties to companies on a long-term agreement basis.
• Industrial premises: This is beneficial for those looking at long-term gains.
• Retail shops: This gives you the flexibility to choose your investment size. If you have a small amount to invest, a small shop may be worth it.
• Special purpose properties: Parking lots, amusement parks, picnic spots, etc., could be lucrative options in the long-run.
• Hotel properties: Eateries and restaurant businesses have traditionally fared well. Depending on your investment size, there are a lot of options.
• Commercial multi-family properties: This insulates you from the risk of vacancy associated with single-family properties.

Things to consider, while investing in commercial realty in Karnataka

Sops for co-working spaces and IT companies

In order to strengthen the IT and co-working spaces in the peripheral areas, IT, BT, science and technology minister, CN Ashwath Narayan, has announced a stamp duty exemption of 75% in Mysuru, Hubballi, Dharwad and Mangalore and 100% for all other zones except Zone 3. Similarly, there will be financial support, provident fund and ESI reimbursement, incentives for mega projects and concessional power tariff, for eligible companies.

Check out properties for sale in Bangalore

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