Revival of Kolkata office absorption space in 2017

Kolkata office market can broadly be categorized under 4 micromarkets - old Central Business Districts (CBD) (Dalhousie), CBD which comprises of Park Street, Camac Street, Theatre Road, AJC Bose road, etc., Peripheral Business Districts (PBD) which is restricted to the Park Circus Bypass connector and the Ruby Bypass connector and Secondary Business Districts (SBD) including Salt Lake Sector V & New Town. For any location to emerge as the new destination for commercial offices, the key parameters include competitive rentals, quality infrastructure, and support from the government. With all the three parameters being met, SBD is fast emerging as the growth corridor of Kolkata with ample supply of Grade A IT Parks and commercial properties, massive infrastructure support, ease of public transport and low rentals. Organisations like TCS, IBM, Wipro, Accenture, Genpact, PWC, Deloitte, and KPMG have large to moderate presence in the SEZ’s of Brookfield, DLF, and the IT Parks of Sector V.

Generally, office rentals are in the range of INR 80-120 in the CBD areas and INR 60-75 in the PBD locations. With very few Grade A options in CBD and rising cost of operations, forced organisations to explore other micromarkets in Kolkata. With an average rental of INR 30- INR 45, Sector V and New Town is considered as a better alternative. Additionally, support services like proximity to the airport and multiple star hotels, lower taxation policy, ease of connectivity, upcoming metro rail, and broader scope of companies coming under the IT/ITeS definition were additional factors for organisations to choose this micro market.

Although Sector V and New Town was initially promoted as an IT destination, but engineering, FMCG, audit firms, BFSI, electronics, automobile and cement companies have also set up their regional offices in this location. The office space absorption can be categorized as IT/ITES occupying 70% of the leasable space followed by BFSI & Audit Firms (20%), and the remaining is absorbed by allied industries. With about 10 million sq ft of vacant space in Sector V & New Town, it can be concluded that vacancy levels will decline with limited supply in the market and capital values are set to remain stable in most micromarkets in the short term due to subdued investor activity.

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