The Hindu Business Line : Biz centres in demand phase

After a lull of almost a year, the market for office space is looking up. But clients have become more demanding, forcing business centres to upgrade their offerings.

DBS Office Business Centres…among the earliest in the business.

R. Balaji

From not looking for more than an air-conditioned room in a readymade office space, customers’ expectations have evolved to taking for granted a WiFi-enabled environment and the latest in décor and facilities. Add to that the market slowdown and growing competition, the readymade office space segment is in for interesting times.

Early entrant

DBS Office Business Centres, among the earliest to set up business centres in India, that is, over a decade back, finds the game has changed. With seven business centres across the metros, which include two in Mumbai, DBS Office is also looking at expanding to more cities. A key feature is that DBS operates out of its own properties which gives it more flexibility in customer offering, say DBS officials.

“Today the customer is spoilt for choice,” said Ms Vanita Bhandari, Executive Director, DBS Office, in a telephonic interview. Apart from the entry of MNCs and more regional players in recent years which has added to the competition, the slowdown in demand for office space over the last one year has made it a customers’ market.

Looking up

Flexible offerings in terms of rent and duration of leasing, space that sports modern ambience and the latest in office facilities are now a necessity. The market is now looking up after a lull of close to a year, says Ms Bhandari.

Enquiries for office space is picking up in Delhi, Mumbai and Chennai with new clients coming in. But the ‘early 2008’ feel of an assured market is gone. Customers are more demanding and bargain hard. They want the latest facilities and ambience all under one roof. Whether it is a conference hall, boardroom facilities, kitchen or IT, it has to be top of the line, she says.

Due to the slowdown, there has been some pressure in pricing since October 2008. It is in line with the hotel industry as rates are driven by occupancy levels. However, the prices of serviced offices are not purely rent related, there are other operational and service costs that need to be considered.

During the slowdown , DBS offered clients incentives, such as a 25 per cent discount on conference room booking and complimentary membership for reputed firms. All these in effect have resulted in a 20 per cent drop in revenue.

Therefore, on an average, there has been a 20 per cent drop in rates across all our Indian locations. However, this trend seems to be gradually changing and DBS is hoping that by year ending March 2010, the rates will get rationalised, Ms Bhandari said.

Client quality

But there is a buoyancy in the market, not necessarily in terms of growing rentals but in the quality of clients. More multinational companies and market leaders are looking for space. Business centres are good indicators of the mood in the market and in recent weeks in Mumbai at least property prices are firming up, she says.

Typically, DBS sets up business centres on its own property, whether it is the 15,000 sq.ft property at Nariman Point, the 30,000 sq.ft, ground+3 floor heritage building at Fort, Mumbai, or any other of its centres.

The company is now looking to invest about Rs 25-30 crore by 2010 to set up new facilities and is scouting for locations. “Pune, Coimbatore, Kochi, Ahmedabad... would be good locations,” says Ms Bhandari.

DBS Office officials at the Chennai centre, where a major sprucing up of the interiors is planned, say business centre rentals in general in prime locations in the city had dropped to about Rs 190-200 a sq.ft from about Rs 250 last October and the competition is stiff as all major players in the business centre segment have a major presence here.

Smaller modules

People concentrate on keeping costs down and are demanding smaller modules. A cabin where usually one person worked has now been changed to accommodate two and DBS offers office space starting from about 70 sq.ft.

To offer more choices to its clients, DBS has tied up with Alliance Business Centres Network which gives them access to over 600 ready-to-use office space across the globe. The company has also tied up with Kingfisher Airlines to offer the airline’s customers attractive offers on using DBS space.

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