Electronic City: Emergence and Rise of a Tech Hub

BY Realty+

Bengaluru, the tech hub of India has stayed resilient during the pandemic and as we emerge out of the shadow of Covid 19, we see a brisk recovery with improved sentiments. Occupiers are assessing and taking measured steps to ensure the best possible return to work strategy. While these are baby steps, the outlook from occupiers, developers and investors are sky high. We see absorption hitting pre covid levels and the optimism from developers are matching this appetite with record levels of supply being projected to be infused in 2022 – 2024.

2021 witnessed the six major cities of the country (Bengaluru, Chennai, Delhi-NCR, Hyderabad, Mumbai, and Pune) registering a 15.5% YOY increase in gross office space absorption at 36.9 mn sq. ft. Interestingly, these cities have expanded to newer suburbs and catered to the demand of cost-conscious occupiers over a period. This has gained more importance in the pandemic as select occupiers look to rationalize real estate costs. 

Bengaluru dominates leasing and supply for the country being the Silicon Valley of India with Outer Ring Road, Brookefield and Whitefield being the largest markets for occupiers. However one self-sufficient, tech driven cluster has gained rapid prominence for large campus style occupiers and niche tech companies called Electronic City. 

This market has grown due to its proximity to residential catchment & talent, access to highways and availability of large land banks suitable for campus style developments. Its self-governing nature of operations is a major differentiator. 

The Electronic City, Bengaluru

Due to availability of land in the 80s, a few companies, mostly dealing in electronics, established themselves in Electronic City. By the 1990s, as the Indian economy opened and liberalisation reforms started to fructify, Electronic City began to transform into an IT hub with companies like Infosys, Wipro, HP, Siemens, and later Intel and TCS setting up campuses in the area. Gradually it became a major hub for the IT-BPM industry and software services as well.

Since its inception, the growth story of Electronic City has been fueled by excellent talent availability, well developed social infrastructure & cost-effective real estate price points, especially in the commercial office market.  Electronic City continues to be a preferred choice for cost-conscious occupiers operating on a ‘$1 real estate cost strategy’. 

Near Dollar Office Rentals And Overall Affordability - Electronic City has perhaps emerged as a prominent micro market in the past five years. This has been marked by a significant change in the market and its buyers, especially in the last two years. The pandemic has caused conglomerates to evaluate value driven locations which offers ability to scale and they have found Bengaluru’s real estate sector ticking all boxes, be it offices, residential buildings, manufacturing units, data centres or life sciences.

Although Electronic City lies in the southern peripherals of the city, the micro market commands a significant interest from occupiers and developers in the commercial office segment, homebuyers, and companies from the manufacturing sector. 

The reasons for this appeal can be attributed to a variety of unique propositions such as relatively lower cost of occupancy, skilled talent availability, campus-style office developments, relatively affordable housing market, quality of upcoming office stock, availability of land parcels for future development and prospective infrastructure upgrade. 

The availability of talent in Electronic City is not only limited to the IT-BPM sector, but also extends to the manufacturing sector, along with semi-skilled workers required for the e-commerce, warehousing, transportation, and logistics sectors. 

The office absorption or even affordability can be directly correlated with the cost of rent in premium buildings of a locality.  Average office rentals in Electronic City have remained less than one dollar throughout the last decade and continue to remain so, while other key localities such as Koramangala, Whitefield and Hebbal no longer offer that advantage. 

Noteworthy advancements in Electronic City - In addition to affordability, infrastructure development has enabled the Electronic City to build a connection with central and suburban Bengaluru. The locality boasts of excellent connectivity through Hosur Road, Electronic City flyover, NICE Ring Road and Heelalige Railway Station. Also, metro connectivity is expected to provide a significant infrastructure boost in the coming years - Electronic City is part of the under construction Yellow Line (Line 3, Phase II) of the city-wide mass transit network.

Within the existing office market of Electronic City, it is noted that IT and allied sectors have contributed more than half of the space uptake since 2019. Manufacturing companies, with a share of 10%, are also a significant demand generator. In fact, manufacturing companies benefit greatly from the robust industrial infrastructure setup of Anekal Taluk in South Bengaluru, including Electronic City, Jigani, Attibele, Bommasandra, Chandapura, and Sarjapur. 

The availability of large land parcels is predicted to meet the anticipated demand in future. More than 70 acres of land have been identified for potential development by leading developers, where the commercial office market of the locality is expected to witness supply addition of more than 3 mn sq. ft. of grade-A multi-tenanted buildings in the next 2-3 years.  Phase-I of the upcoming Bengaluru Life Sciences Park (BLSP) is expected to be completed by 2022. The entire project is being planned on a 52-acre land parcel and has a potential development area of 10 mn sq. ft. 

Furthermore, the presence of many gated communities, good social infrastructure in terms of educational institutes, hospitals, and neighbourhood retail stores act as a shot in the arm for the entire real estate spectrum of the locality including residential real estate.

Tags : Sarita Hunt Managing Director Bengaluru Savills India Hosur Road Electronic City flyover NICE Ring Road Heelalige Railway Station