Are we overproducing commercial space?

Real estate developers in every major city are scouting out newer areas to spread into. Erstwhile suburbs have been blended into city area plans and are under corporation administration. The cities have grown in every available direction. Governments have identified and marked out areas for commercial development and surrounding these the residential properties for sale are springing up by the dozen. In cities like Bangalore and Chennai there are dedicated corridors for IT companies and builders have constructed a few crore square feet of space in these areas. But with the slowdown in the economy and companies looking to put their expansion plans on hold, commercial space is suddenly in abundance.

The vacancy rates are rising up as many firms are moving into SEZ demarcated areas to avail the tax benefits and the ones taking the hit aren’t just office spaces but the surrounding shopping centres as well. Once bubbling with prospect the oversupply has definitely dampened the spirits of the builders and investors alike. If the economy decides to stay stagnant or takes a plunge, what would we do with so much space?

The more eccentric of option would be to convert these spaces into vertical gardens and spaces of community activity. While this might sound like a radically good idea, it isn’t practical at all times. But there are some uses that be gotten from these spaces if only realtors can be more imaginative and less strict on pricing

1.      Warehousing – There are several companies today that are working on the warehouse and delivery model of retail. They need multi locations across large cities to enable better time efficiencies. The large floor plates offer for better and easier storage and warehousing abilities for these commercial spaces. The rentals would play a key role in this type of rethink.

2.      Day Care centres – Office generally need day care centres closer to their place of work or near their homes. Unused commercial space offers large floor space to set up interesting day care services. These can be run independently or as a perk by the company itself.

3.      Engagement centres – Companies conduct training programmes and generally lack large spaces and are dependent on hotels which are an expensive proposition. These commercial spaces can be converted for use as convention centres or training and engagement centres. This would be a cost effective solution for the company and also a consistent income generator for the realtor.

4.      Creating smaller zones – Entrepreneurs and new business generally need cost effective and smaller spaces. Location also is an important factor to them and if realtors can capitalize on this need then they can easily find more use and a regular income flow for their space.

5.      In malls and large shopping centres, large format stores are moving out owing to expense. Instead of this stores can look at subletting their space and co-existing with other brands that compliment them.

Investment recovery isn’t straight forward in the times of a slow or stagnant economy. A bit of creative thinking can open many possibilities.

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