Demand for office space is likely to rise 10-12 per cent this year across major cities with foreign companies looking to set up Global Capabilities Centres (GCCs) in India, according to realty firm RMZ Group Chairman Raj Menda. Bengaluru-based RMZ Corporation is one of the leading commercial real estate developers in the country.
In an interview with PTI, Menda, Chairman of Supervisory Board at RMZ Corporation, said the absorption of office will grow by about 10-12 per cent this year across six major cities. He rued that the demand is still concentrated in these top six cities.
Gross leasing of office space stood at 58.2 million square feet in 2023 calendar year across six major cities namely Bengaluru, Chennai, Delhi-NCR, Hyderabad, Mumbai and Pune, according to a FICCI-Colliers report.
Menda, who is also Chairman of FICCI Committee on Urban Development and Real Estate, noted that the demand for bigger spaces, starting from 5 lakh square feet to 10 lakh square feet, from foreign firms has tapered down and enquiries are more for 50,000 square feet to 2 lakh square feet office spaces.
"In pre-COVID, the bigger companies which were coming in used to commit and pre-lease large office spaces. So we would, at RMZ, get commitments of 5 lakh square feet to 10 lakh square feet, that has tapered down," Menda said.
Now, he said these companies are looking for 1-2 lakh square feet space space.
"But the good part of the story is... a lot of GCCs are coming in now to start their businesses here," he added.
India still provides low cost alternatives for these GCCs, Menda said, while emphasising on the availability of skilled talent and cheaper real estate in the country.
"So they are setting up offices and their requirements typically range between 50,000 to 1,00,000 square feet as they are starting business for the first time in India. But once they set up office here, then they tend to grow very rapidly," he observed.
Menda also mentioned that the demand for Grade-A office space is primarily emanating from six major cities -- Bengaluru, Mumbai, Hyderabad, Chennai, Pune and Delhi-NCR-- because of the availability of skilled talent.
"What is currently happening, is happening only in the six cities. We are not getting any inquiries beyond these six main cities and still Bengaluru leads the way...," he said.
The RMZ Group Chairman also remained bullish about the growth of the flexible workspace segment in India.
He said the new company entering the Indian market wants to test the market first. Therefore, initially they would prefer working from a managed office space.
"They prefer to work in a co-working space for a year or two, get the correct comfort and then decide how much to grow," Menda said.
Regarding the RMZ Group business, he said the company has an ambitious expansion plan.
Menda said the group became debt-free after divesting a significant part of its commercial real estate portfolio in 2020.
In December 2020, RMZ Corporation completed the sale of its large commercial portfolio to Brookfield for USD 2 billion. The company had sold 12.8 million sq ft so far.
To expand business, RMZ Corporation in November last year announced a massive investment of USD 7 billion over the next five years to develop office, residential, warehousing, hospitality and mixed-use projects worth USD 25 billion across major cities, as it sees huge growth opportunities in Indian real estate.
RMZ, which is privately owned by the Menda brothers, has been primarily in the development of Grade-A office complexes, and it has now decided to diversify into other segments of real estate.
In 2021, the group tied-up with Canada Pension Plan Investment Board (CPPIB) to develop office complexes in Chennai and Hyderabad. The CPPIB will invest USD 210 million in the joint venture.
Source: economictimes.indiatimes.com
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