Track2Realty Exclusive: The occupier report of office space is often seen as the barometer of the vibrancy of the given property market since it indicates the level of economic activity that sustains all other segment of real estate, residential and commercial in particular. However, in downtown Coimbatore market this premise was never considered for critical evaluation since the market had multiple demand drivers and office uptake was not necessary criterion for any of these demand drivers.
As a matter of fact, since the Coimbatore was by and large catering to the end-users and not investors who were local buyers, the economy of the city was not office driven in the traditional sense of the term.
The Coimbatore property market has been by and large catering to the local demand and the buyers’ economic activity has been inter-woven with the economic activity and tradition that have given the city a unique identity. Other than agriculture, what has been driving the economy of the city is the industries in general and textile in particular. And hence, the demand of real estate has by and large been residential and industrial. What then changed the outlook of the city that office uptake became one of the significant demand drivers?
Facts speak for themselves. In the first three quarters of 2013 when the overall net absorption of office space across the country registered a downward trend, Coimbatore has been slowly but surely scaling up in its demand of the office space. The net absorption of spaces till Q3 2013 has been registering a positive 3 per cent growth on year-on-year basis.
While the major office markets like Delhi and Mumbai registered a negative growth of 7 per cent on a year-on-year basis due to slower economic growth that led to decline in expansion by companies, it seems Coimbatore market that is predominantly known for cautious sentiments have bucked the slowdown trend. Coimbatore has been among the rare Indian markets where the office uptake has been in the positive zone.
Analysts tracking the property market in this part of the world maintain that the very nature of the local economy is increasingly changing. According to them, in the past few quarters there has been an increasing trend of relocation of companies to bigger spaces. Though majority of such relocations are noticed in the CBDs and off-CBDs in other major markets, in Coimbatore the proliferating Small and Medium Enterprises (SMEs) has led to emerging locations command a higher increase in rental than the established locations.
The areas in and around the proposed Coimbatore-Tirupur-Erode Industrial Corridor is commanding a significant interest among the companies based in the city. To add to it, many new companies from other markets are also eyeing this future high economic zone for business. Collectively, this is proving to be a happy hunting ground for the developers of office spaces.
However, what has probably been the most significant change in the office uptake of Coimbatore is the fact that it is no more IT/ITeS driven growth. Of course, these IT/ITeS companies are increasingly relocating from one building to the other in the same micro market due to cost advantages, but the real demand has started coming from the SMEs.
For the economists looking for under-currents of economic revival, it is quite an interesting study in this property market that even in the tough economic conditions many of these companies have consolidated their multiple offices, spread across the city, to a single large office. The idea is to maximise operational expenses and efficiencies. This indicates the increasing bias of office occupiers towards Grade A office developments in future to generate more demand. Coimbatore till recently has been known for moderate office uptake and that too in the Grade B and Grade C spaces.
Analysts feel the focus is increasingly shifting on the quality office space across the city. They believe very soon this market will scale up to be compared with the office market of other major cities. This also raises a fundamental question as to whether the next boom is expected in the office space of Coimbatore realty.
Raj Kuneru, Regional Head, RE/MAX Rest of the Tamil Nadu maintains Coimbatore, as office space market is doing really well. With many companies opening their operations in the city Coimbatore is anticipated as a next big corporate hub. Due to this tremendous growth many big players in real estate market are keen to invest in this place.
“The focus is increasingly shifting on the quality office space. But then Coimbatore is a growing market in office space and hence many players are investing in it with innovative and modernized architectures compared to other cities. I strongly feel that the next boom is expected in the office space of Coimbatore realty,” says Kuneru.
It is generally believed that till very recently the fundamentals of Coimbatore real estate market were not dependant on the office spaces. Moreover, the uptake in the office space has been by and large IT/ITeS driven. However, the trend has changed in the last 18-24 months, something that makes the analysts extremely curious about the future of the commercial real estate in general and the office market in particular. They believe if one more demand driver has come up so well even in the wake of overall economic slowdown, the indications are pretty positive for the city property market once there is some stability in the economy.
What next? Can Coimbatore scale up in the top eight to ten cities in terms of higher occupiers of Grade A office spaces? Well begun is half done, and only by the end of 2014 it will be evident as to whether Coimbatore has truly arrived as a key city for office space absorption. Till then, Coimbatore continues to attract the realtors for developing office space, while analysts would be busy with their own cost-benefit analysis. But what can be vouchsafed as of now is that Coimbatore office property is definitely stepping out of the shadow of only IT/ITeS driven growth; something that is making everyone smile in anticipation of future growth.
