As you approach Noida from south Delhi, the skyline is dotted with towering cranes that jut out of construction sites. In what seems like a demand-supply paradox, Noida and Greater Noida have seen a spate of big-ticket launches in the commercial mixed-use development space over the last couple of months, even though real estate sales remain sluggish. Developers are bundling commercial, retail, high-end residential units and hotels within the same project hoping to stand out in the clutter of unoccupied commercial office space.
On offer are energy-saving green buildings, plug-and-play office facilities and work-play-rejuvenate-stay concepts. It appears that the developers are expecting the current glut in office space to clear out over the next three years. They are also betting big on a corresponding upswing in property rates when the deliveries begin in phases. The current vacancy levels in commercial office space hover around the 20% mark — in 2011, of the 45 million sq ft of office space available in the seven top cities, just about 36 million sq ft was taken up.
A recent end-user survey by DTZ Research says most corporates — essentially IT/ITES and BFSI companies — have put their expansion plans on hold till Q3CY12. It takes a braveheart to launch fresh commercial projects in such a market.
However, Neeraj Gulati, managing director of NCR-based Assotech Realty, believes the current down cycle in office space will turn around over the next two years. When that happens, Gulati says, he wants to be ready to make the most of it. Facilities at his new project, Assotech Business Cresterra (delivery in FY16) on Noida Expressway, include shopping outlets, restaurants, a crèche and amphitheatre, among others. Sales have opened at around ₹5,600 per sq ft. “The future is in mixed-use commercial development,” he adds.
A few kilometres away in Sector 32, Wave Infratech is also touting its walk-to-work concept in a 152-acre project at the Wave City Center. In the first phase of the project, expected to start deliveries in 2016, the focus is more on selling high-end residential units and retail outlets than on office space. Service apartments here are being offered upwards of ₹7,300 per sq ft, dealers say. “We have deliberately kept the bulk of office space sales for phase II of the project, which is coming up in 2016,” says RK Jain, executive director, Wave Infratech. Jain is also betting on a turnaround in the commercial office market by that time.
Real estate analysts say integrated mixed use development usually commands a premium of 10-15% over vanilla office spaces. These high-stakes mixed use projects are a long-term play compared with plain residential or commercial offerings. Developers wanting to cash in on such projects, will need deep pockets. Wave Infratech, for instance, plans to spend ₹4,000 crore over the next three years in the Wave City Center project. It’s anybody’s guess whether the bets will pay off, but developers are ensuring that they are heard loud and clear in a market that has been felled by high property prices, high interest rates and procrastination by customers.
