In 2016, Bangalore office market does the best in 5 years: Knight Frank

BENGALURU: Bangalore office property market strengthened in 2016 recording a transaction of 11.4 million sq ft, which is the highest in five years. New completions observe an increase of 12% over 2015, said a recent report by Knight Frank.

The city has witnessed transactions of 5.3 million sq ft during the second half of 2016 with new completions in this period at 3.5 million sq ft. The growth in office space is in contrast to the residential market where demand has declined significantly. In the second half of 2016, new launches of residential units declined by 45% from a year ago while sales volume dip by 27%.

Demonetisation has impacted the city’s real estate market quite substantially in the fourth quarter of 2016. During this period, new launches and sales of residential apartments fell by 65% and 45% respectively. “While the growth appears to be tapering, it should also be noted that the IT/ITeS sector, which is the key demand driver of the office market in Bengaluru, has matured and stands on a bigger base today, ” said Satish BN executive director south, knight frank.

Despite a large quantum of transactions, growth trend remains relatively constrained due to stiff competition from other cities, primarily Hyderabad. Vacancy rates continue its downward movement; presently at 6%. “The IT/ITeS sector, while leading the share of total transactions in the city, observes a drop in transactions share to 62% in H2 2016 from 70% in H2 2015,” he said.

The Outer Ring Road (ORR) office market, which has been struggling in the past few quarters on account of dearth of ready to occupy space, sees its share further reducing in second half of 2016 compared to H2 2015.This has resulted in the PBD East market, mainly comprising Whitefield, step up to cater to potential occupiers.

The weighted average rental values witnessed a significant increase of 12%, from Rs 51.5 per sq ft per month in H2 2015 to Rs 57.8 per sq ft per month in second half of 2016, primarily due to the anticipated demand for large spaces as well as the lack of vacant office stock in the preferred office markets.

Credits ET Realty

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