Bangalore :

Hyderabad is the world’s second most affordable office market after  Surabaya in Indonesia , according to a survey, while Chennai and  Pune are at fifth and sixth positions, reinforcing India’s reputation as among the cheapest destinations for foreign firms to set up operations.

“Tier II cities in China and India continue to dominate the list of top-10 most affordable markets globally,” said a survey by consultancy firm DTZ, which measured occupancy costs per workstation in 126 business districts across 49 countries in 2012.

“2012 has seen office space absorption rates across Indian cities drop by a fifth. We expect the office space absorption to be stable in the current year, driven by signs of overall improvement in global and domestic economies. Rentals are also expected to appreciate across the country,” said Rohit Kumar , head of research at DTZ India.

According to the survey, it costs companies between $2,620 (about Rs 1.41 lakh) and $9,810 (Rs 5.27 lakh) per annum per employee in the top six Indian cities to set up operations, compared with $23,500 (Rs 12.63 lakh) per workstation in London West End .

China’s  Chongqing and Nanjing , followed by Cancun  in  Mexico , also figure among the ten most affordable markets. As per the report, a majority of markets in North Asia  and India saw a 2-10 per cent rise in occupancy costs. This has forced occupiers in many markets to increasingly consider secondary space, particularly where prime space is limited to cut cost.

The total commercial office space absorption for the quarter ended December 2012 was 6.8 million sq ft, a decrease of 19 per cent compared with the previous year. Vacancies across cities are expected to rise in 2013, except Bangalore, a recent report by DTZ India  said.

“Companies continue to consolidate and relocate to less premium locations. Many firms are now looking to cut real estate  costs, which comprises 22-27 per cent of the total operational expenditure, the second biggest component after human resource,” said Sridhar Raghavendra , founder of  FM Zone India , a real estate and facility management firm.

source: http://www.articles.economictimes.indiatimes.com / Home> News> Realty Trends> Policy> Office Space / by Sobia Khan, ET / February 14th, 2013