Despite an increase in absorption, rental values of grade A office spaces in most cities, barring a few micro markets in Gurgaon, Pune and Bengaluru, remained stable in the September quarter due to high supply, reports property consultancy Colliers International.
Udyog Vihar in Gurgaon was the worst market in terms of office rental growth, registering a dip of 20% year-on-year (YoY) in the quarter.
“In most markets, supply is complementing demand keeping rents at the same level,” said Surabhi Arora, associate director – research at Colliers India, adding, “Landlords are continuing to be flexible with the rent and furnishing negotiations.”
However, a few micromarkets registered jump in office rentals in the September quarter. While Golf Course Road and Cyber City in Gurgaon registered 20% and 18% YoY growth respectively, Outer Ring Road and CBD in Bengaluru recorded 11% and 16% YoY growth. Hinjewadi, Kharadi and Airport Road were the high rental areas in Pune, clocking 14%, 19% and 13% growth.
While the residential real estate sector continues to witness subdued demand, office market is seen to be booming with renewed interest from corporate on improving macroeconomic factors. Overall, office market sentiments remained positive with over 10.6 million sq ft of absorption recorded in the September quarter this year across major cities in India. Around 30 million sq ft has been absorbed so far this year, registering a 11% growth over 27 million sq ft recorded in the same period last year.
Among the major transactions in the September quarter, Accenture leased 437,000 sq ft of office space in Shriram Gateway SEZ on GST Road, Bengaluru, while Yes Bank leased 400,000 sq ft in India Bulls building at Ambattur, Bengaluru. Google India leased 402,860 sq ft in Signature Tower 2A & 3 in Gurgaon, while Abbott India leased 400,000 sq ft in Mumbai’s Godrej BKC.
The consultancy does not expect any major increase in rental values in the next quarter also. “However, a few prime buildings will continue to fetch premium in select micro-markets pushing the average rents marginally,” said Arora.
Meanwhile, according to another report by property consultancy Knight Frank, Indian cities of Mumbai, Delhi and Bengaluru have topped the global commercial property market in terms of annual rental yields. While Bangalore topped the list with 10.5% annual rental yield, cities like New York, Singapore, London, Tokyo and Hong Kong ranged between 2.9% and 7%.