In a recent interview with businessline, Pavitra Shankar, Managing Director of Brigade Group, expressed optimism about the office space market in India, highlighting its strength in contrast to the global market. The Brigade Group, a prominent real estate developer, reported a net profit of ₹63 crore for the quarter ending in March 2023, marking a significant improvement compared to the ₹11.63 crore loss reported in the previous year. Shankar emphasized the positive outlook for office space in India and shared insights into the company’s strategy and expectations for the market.
When asked about expanding the business nationally, Shankar explained that the Brigade Group’s focus remains on its local zones, including Chennai, Chikmagalur, Hyderabad, Kochi, Bengaluru, Mangalore, and Mysore. According to Shankar, each market has its own unique dynamics and complexities in terms of customer preferences. The chosen markets align with the Brigade Group’s target demographic, driven by the presence of the IT sector and a high concentration of white-collar jobs. Shankar emphasized the importance of understanding market relationships and risks, highlighting the potential for future growth within the selected markets.
Regarding the office space market, Shankar discussed the Brigade Group’s current operational space of approximately 8.5 million square feet, with 1.25 million square feet still available for leasing. He acknowledged the challenges in the SEZ (Special Economic Zone) space, where vacancies are more prevalent. Shankar mentioned the absence of communication from the government regarding the extension of SEZ privileges, which has contributed to an overall slowdown in the sector. Nevertheless, he expressed confidence in the promising prospects of office space in India, emphasizing the high demand for Grade A office space. Shankar noted that India stands out globally, as physical office occupancy is increasing, unlike in the Western world where it remains sluggish.
To leverage the strong demand for office space, the Brigade Group is actively seeking new land and potential partnerships with institutional investors for office construction, holding, and leasing. The company aims to capitalize on the opportunities presented by the office space market and contribute to meeting the demand for quality office spaces.
The interview also touched upon the rising demand for office spaces in Hyderabad, surpassing that of Bengaluru. Shankar acknowledged Hyderabad as a strong contender to Bangalore, citing the oversupply of office space and competitive rental rates in Hyderabad as factors contributing to its growth potential.
Shankar revealed that the Brigade Group is in discussions with private equity (PE) funds and investors to expand its hotel and office portfolios. After weathering the challenges posed by the pandemic, the Group’s hotel portfolio has shown significant improvement in recent years. Shankar expressed the intention to expand the portfolio and acknowledged the potential benefits of partnering with entities that provide expertise, tenant relationships, sustainability measures, and capital.
Addressing concerns raised by figures such as Elon Musk and Robert Kiyosaki about a potential meltdown in the commercial real estate market, Shankar remained optimistic about the Indian market. He noted that the observations made by these individuals primarily pertain to Western markets, where remote work has reduced the demand for office spaces. Shankar emphasized that the Indian market operates under different conditions, with substantial ongoing construction of commercial office spaces. While acknowledging the need for adaptation and improvement in response to changing tenant preferences, Shankar dismissed the notion of a commercial real estate meltdown in the Indian market, citing the country’s unique circumstances and ongoing demand for upgraded spaces and enhanced tenant experiences.
Overall, Pavitra Shankar’s insights and positive outlook reflect the Brigade Group’s confidence in the Indian office space market, where demand remains robust despite global market trends. The company is strategically positioned to leverage opportunities for growth and contribute to the development of quality office spaces in key Indian cities.
