Startup firms boost commercial real estate
Despite low rent, startups are helping realtors to reduce unused inventory.
Mumbai: Startup firms are giving a boost to the commercial real estate business, which is saddled with huge inventories in major cities. India is the third largest startup destination in the world.
Though their demand for space is much less than that of large companies and their ability to pay much less, “these emerging startup business enterprises have immense potential and are enabling property developers to sell their inventories that have been lying vacant,” said Ravi Gurav, vice-president, Dheeraj Realty and member MCHI-Credai.
In Hyderabad, for instance, they are expected to occupy six lakh square feet in 2016-17 of the approximate vacancy rate of 11 million square feet. While big organisations pay upto Rs 250 per square foot per month, new startups are not will to pay more than 100-150 per sq foot per month.
However the returns on commercial property are around 6-10 per cent per annum and the smaller size units yield higher returns, he said. Bengaluru, often refer-red to as India’s Silicon Valley, has been listed within the world’s 20 leading startup cities in the 2015 Startup Genome Project ranking.
Cities like Chennai, Hyderabad, Pune, Ahmedabad, Jaipur are also emerging as startup-hubs as governments try to encourage innovation and entrepreneurship in their states.
In Mumbai, commercial property inventory is approximately 20 crore square feet, with the vacancy rate at approx. 3.6 crore square feet of 18 per cent of the total inventory.
Of this, new startup firms are expected to occupy — seven lakh sq ft in 2016-17 at an average rate of Rs 114 per square foot per month against the year-to-date net absorption Q4-2015 35 lakh sq ft.
In Delhi, the new start-up expected to occupy seven lakh sq ft in 2016-17 at an average rate of Rs 73/sq ft pm. In Bengaluru, new startups are expected to occupy 1,900,000 sq ft in 2016-17 at an average rate of Rs 54/sq ft per month cutting down by 15 per cent vacancy rate of 1.65 crore sq ft. In Chennai, new startups are expected to occupy five lakh sq ft in 2016-17 at an average rate of Rs 42 square foot per month.