Bangalored – Not Anymore? – Real Estate giving jitters – Companies moving out of Bangalore

With the real estate prices skyrocketing in the main business centers within Bangalore city limits, the city is set to see companies moving out of Bangalore.

The term Bangalored meant people in other parts of world loosing their jobs to people in Bangalore. However, Are bangalorians set to see terms like Cochined? Hosured? Mysored? Chandigarhed? Or probably Eastern Europed? Or Czeched?

Premise:

Not just the living cost but the costs have gone up in all respects in Bangalore. Whether it is salaries, cost of living, daily groceries, house rents, office space rents, taxes and expectations…almost everything has gone sky looking.

So if you were a 50 – 150 employee organization running in a busy business centre or a focal business area in Bangalore, you would be paying anywhere between, Rs. 70 – 150 / Sq ft of office space cost. With these things in mind, we are talking about almost a 100% increase in rents since past 3 years. Resulting in increased operating costs and decreased margins. Eventually cuts in company expenditures leading to options like either looking for a cheaper space outside Bangalore or doing employee cut.

Considering most of the companies face a 10-20% attrition rate and they would want to keep the hiring and training costs low, employee layoff is the most risky proposition. So companies are looking out for various ways to cut their op-ex.

Reasons:

If you were thinking organized retail is the best thing which is happening to Bangalore with over 20 shopping centers and retail malls opening within past 3 years, Bangalore is getting modernized and seeking high paced positive growth.

Here is a realty check. Considering the revenue a retail shopping mall / food complex is going to make on a monthly basis would be much higher as compared to any company paying as a rent. The malls, retail chains and similar sorts are ready to shell out almost 200% more than what the regular companies / young entrepreneurs can give as rents. So obviously the land lords would want more moolah and boom, the deals get signed with the highest bidding retailers.

Large office spaces like Whitefield/ITPL/Electronic City are anyways facing issues of long traveling hours for employees, unsatisfied employees, increased travel costs, higher stress levels, increased residential real estate prices putting pressures of increased salaries, higher expectations and more…Companies like Wipro, infosys and many more are even adopting policies like allowing employees to work from home, stay in their home cities and moving their bases to 2nd rung cities already.

Bangalore not an entrepreneurial heaven any more.

Not just retail, companies are these days being pushed to revise the rent agreements signed long back. This again, is giving jitters to companies working for long in same places. The entrepreneurs are seeking it difficult to get a reasonable office space at a cost that they can afford and which is aborting a lot of ventures which could have burgeoned into tomorrow’s infosys’.

What’s Government doing?

After year’s of resistance and so many court cases, Delhi government decided to shut down commercial establishments in residential areas. This lead to shops moving into malls and shopping centres authorized for the same. In turn led to people moving to move out of expensive places in Central Delhi to Gurgaon, Noida, Faridabad, Ghaziabad and more. The city saw a rental price correction and more organized businesses.

What is Karnataka government thinking? Are they going to keep allowing commercial shopping centers in residential and office areas? Is their any policy to control this? When are they going to wake up? Is their going to be some regulation on the rentals? Or will the government just bother about who is taking the Seat in Assembly?

Strangely while all this is happening, the CM and rest are busy in their new mid term election games. Pathetic situation of city’s infrastructure doesn’t bother them. It is painful when they cut 33% of my salary as a tax and I do not see infrastructure in front of me. And then I see my money is being wasted for an unwanted state elections.

Closing thoughts:

With the distanced attitude of the government, poor infrastructure, no means to control prices. The “Bangalorians” are all set to see job cuts, jobs moving out of Bangalore, consolidation in salary hikes, surrounding cities taking over, or you never know, Bangalore loosing it’s image as silicon valley to a realty stone valley.

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