Limited supply of Grade A office space pushes up rentals

MUMBAI: Robust demand from occupiers and limited supply of grade A offices have continued to push rentals in prime Indian office space markets including Mumbai’s Bandra-Kurla Complex, Connaught Place in New Delhi and Bengaluru‘s MG Road.

In terms of rental growth, Connaught Place with 10% year-on-year rise is second only to Hong Kong, followed by Tokyo and Shanghai at 9.1% and 7.5%, respectively. Prime rentals in Bengaluru and Mumbai have also seen annual rental growth rates rise steadily over the past eight quarters and rose 4.9% and 2.9%, respectively, during the first quarter of 2016, showed Knight Frank Asia Pacific Prime Office Rental Index.

“As vacancy rates in these markets are now in single digits with very little office space coming up in the next 12 months, we expect this strong rental growth trend to continue in the next 12 months for Mumbai, New Delhi and Bengaluru prime offices,” said Samantak Das, chief economist, Knight Frank India.

According to Das, the rising rentals are effective result of falling vacancy rates indicating good demand and constrained supply of grade A office spaces as most developers did not launch any major commercial projects since 2009.

Prime office property markets of Delhi and Mumbai rank 5th and 6th costliest in the Asia Pacific region.

The index showed 12 out of the 19 markets tracked have registered positive rental growth in the first quarter of 2016, as against 8 markets that showed upward rental move in the previous quarter.

Due to the rising demand, developers with ready commercial projects are seeing change in business scenario since the past few quarters. “Enquiries have certainly gone up from occupiers segment.

We have been able to conclude the transactions faster than expected and that too with an uptick in lease rentals,” said Vipul Shah, MD, Parinee Group.

Credits ET Realty

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