Bengaluru, the country’s centre for information technology, e-commerce and start-ups, is turning out to be the hottest market for office space leasing in the country, reports Shubhra Tandon in Mumbai. Not just in absorption volume, where the city is gradually overtaking the traditional office leasing markets of Mumbai and Delhi, but even the rate of appreciation in rents is far higher, though on a smaller base.
Bengaluru has seen a good 12% to over 21% year-on-year escalation in rents in different micro-markets of the city in the three months of July-September 2015, latest data from CBRE South Asia show. As demand from the e-commerce, e-tailing and the traditional IT/ITeS segments drive office space absorption in the city, Bengaluru is poised for strong growth in office space leasing.
A recent report from another global property consultant, Knight Frank, ranked Bengaluru as the city commanding the highest prime rental yields among top 21 cities across the globe. Making it the best bet for office investments, the report said Bengaluru offers a rental yield of 10.5%, which is way higher than the 4% yields in London or New York.
Bengaluru recorded 2 million sq ft of absorptions in the quarter ended September, higher than the absorption in Mumbai, which stood at just 0.8 million sq ft. However, the national capital region was still a bit higher at 2.8 million sq ft of absorption recorded.
Apart from Bengaluru, rental values were mostly stable in the central business districts (CBDs) of most leading cities. Sustained occupier interest and lower vacancy rates in select prominent developments resulted in rental appreciation on MG Road/Residency Road in Bengaluru, and Shivaji Nagar, Bund Garden Road, Koregaon Park and MG Road in Pune. Restricted demand levels prevented rental values to increase in Nariman Point, Fort and Cuffe Parade in Mumbai, while Delhi’s Connaught Place saw just a few small transactions from banking/financial services and media firms.
Additionally, a steady rise in demand led to appreciation in rents in prominent IT and SEZ developments of Gurgaon in Delhi NCR, and Aundh, Hinjewadi, Kharadi and Baner in Pune.