High Street Tracker: How flex office spaces stirred demand in one of Bengaluru's top High Streets, MG Road

In the post-pandemic era, though, a shift in the work culture has boosted co-working spaces across the country.

There is an MG Road in every major city in India. The one in Bengaluru, though, was viewed as the primus inter pares among central business districts (CBDs) when it came to High Streets with that appellation.

However, demand had largely remained stagnant due to a space crunch and already steep commercial rents compared to other parts of the city. In the post-pandemic era, though, a shift in the work culture has boosted co-working spaces across the country. And that has stirred demand for one of Bengaluru's top High Streets, MG Road.

Flex operators continue to aggressively lease older buildings or even newer small-footprint supply to repurpose as co-working spaces, said Rahul Arora, regional managing director, Karnataka and Kerala, office leasing and retail services, JLL.

Last June, flex office player Awfis leased 65,000 square feet in Lido Mall on MG Road. Among the other players, coworking space provider BHIVE has taken on about 1,000 seats of flex office space on the arterial road.

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Vimal Nadar, head of research for Colliers India, estimates that MG Road currently has less than about 8.4 lakh square feet of Grade A office space portfolio spread across the prime CBD.

Good connectivity and social infrastructure have also contributed to the popularity of MG Road as a commercial office destination. And this has also started changing the Grade A office space landscape across the area.

Over the last four to five years, MG Road has seen many new Grade A developments being delivered by reputed builders that have been leased by global multinational clients such as Apple, Deloitte and Rakuten, Arora said.

Commercial rates rise, retail to remain stagnant 

There is an odd paradox at play here. Compared to the pre-pandemic era, the cost of office spaces has jumped by about 15-20 percent to Rs 100-150 per square foot, local brokers estimate.

According to Sunil Singh from Realty Corp, the current rental cost for office space on MG Road is between Rs 1 lakh and Rs 5 lakh per month depending on the size of the office space, with a chance of a marginal 5 percent appreciation over the next few years. This has been driven by the back-to-office drive by companies (which has also had a knock-on effect on home rents as people flock back to the city from their hometowns).

The higher demand for office space on MG Road, though, has largely been on account of companies seeking co-working space as part of their flexi-work plans to retain talent.

"However, compared to other High Streets in Bengaluru like Indiranagar or Koramangala, the costs for office space remain stagnant due to a space crunch and also already high rentals compared to other parts of the city," Nadar of Colliers added.

On the other hand, retail remains to be the prime attraction for MG Road with global brands like One Plus, Samsung, Under Armour, Nike and Starbucks adding to the experience for the shoppers. Currently, the cost for retail spaces is about Rs 200-250 per square foot, a 20 percent jump compared to pre-pandemic levels.

That’s set to change. With several challenges like an already established market and a space crunch, real estate brokers say that while retail spaces will appreciate by 5 percent, office spaces can appreciate by 15 percent over the next few years.

Changing real estate landscape of MG Road

Recently, Bengaluru’s MG Road topped the list of High Streets in India, followed by Somajiguda in Hyderabad, according to Knight Frank India’s flagship annual retail report. To be sure, what used to be one street currently branches into Church Street and Brigade Road.

Brokers say while Brigade Road boasts of global retail brands, Church Street attracts millennials with a row of eateries and gastropubs. As an aside, in 2017, the redevelopment of Church Street was completed at Rs 9 crore and since then, retail rates have jumped 10-15 percent more than those on MG Road proper.

Given its convenient downtown location, MG Road's growing brand visibility, the newly-added metro infrastructure has augmented the appeal of restaurants, night clubs and other recreational areas that dot the area, making it a magnet for cafes and co-working spaces that need to attract a younger age cohort, said Nadar. And that has slowly started transforming the real estate landscape.

"On weekdays, MG Road sees an average of 30,000 footfalls, which may go up to 60,000 to 1 lakh" on weekends, said Abhishek Sharma, director, retail, Knight Frank India said, underlining the CBD’s popularity as a hangout spot.

The article has been updated on June 8, 6:06 PM.