Welcome to CREDAI NCR
The Times of India
The office-space crunch in the country's tech capital has prompted a top developer to acquire an upcoming luxury hotel project to expand its business park.
The office-space crunch in the country's tech capital has prompted a top developer to acquire an upcoming luxury hotel project to expand its business park.
RMZ Corp is acquiring what would have been Bengaluru's second Shangri-La hotel for a little over $100 million (Rs 700 crore) to build additional 2.5 million sq ft office space in the city's IT suburbs.
RMZ has struck a deal to buy the 15-acre hotel project, adjoining its Ecoworld business park on Outer Ring Road, from rival Adarsh Developers. The Qatar Investment Authority, an investor in RMZ, is funding the transaction signalling the robust appetite for rent-yielding office properties, which count the tech units of marquee global corporations as tenants. RMZ is expected to pull down the structure substantially for office space development.
Hong Kong-based luxury hotels group Shangri-La said in 2015 that the new hotel was scheduled to open in December 2016 with 300 guest rooms and suites. The Asian hospitality chain operates a 19-storey, 397-key hotel near the city centre. The second one was to be named Shangri-La Palm Retreat.
Another large commercial developer, Embassy Group, and Singapore's Ascendas have also clinched land deals in recent months to expand office portfolio in north Bengaluru. The latest deal-making could see RMZ Ecoworld taking its leasing potential to 10 million sq ft, rivalling Manyata Tech Park of Embassy as the city's largest work destination.RMZ vice-chairman Manoj Menda and Adarsh Developers CMD B M Jayeshankar were not immediately unavailable for comment.
In the April-June quarter, Bengaluru's office rentals spiralled as vacancy rate dropped to 3.4%, much below the desired 10% in a stable market. This is a continuation of the trend seen last year, when the city recorded its highest leasing activity of about 14 million sqft. Bengaluru has a total stock of 96 million sq ft Grade-A office space today, according to independent property consultancy JLL.
The strong office-leasing market in Bengaluru is a contrast to the otherwise-sedate real-estate story in the country. While residential property market is in disarray, even commercial space activity is yet to mirror the GDP numbers. The office leasing market in the software exports, or broadly off shoring, has made cities like Bengaluru an attractive investment bet for sovereign wealth managers and global pension funds searching for long-term stable yields in commercial real estate.
The growth in off shoring activity by the world's top financial services giants, the rise of the billion-dollar start-ups and the continuing story of global corporations moving R&D and engineering work have sustained and fuelled Bengaluru's office leasing activity .
Top US banks have expanded their tech and back office work in the city. E-commerce majors Flipkart and Amazon struck some of the biggest office leasing deals in the past 18 months.
Keywords: real estate