Bengaluru, Delhi likely to be 3rd & 4th fastest-growing in office rentals globally

Bengaluru: Bengaluru and New Delhi are likely to be the third and fourth fastest-growing office markets globally in terms of prime rentals on the back of upbeat demand and inadequate availability of quality properties. Office rental values in Bengaluru are expected to increase 6.6% over 2018, while in New Delhi they may rise 6.5%, this year, according to a report by Knight Frank India.
Rentals are getting a boost as demand remains buoyant from IT/ITeS companies and startups amid lack of quality space in key markets.

Bengaluru saw prime rental values of Rs 125 per square foot per month in 2018, mainly on account of low Grade A supply, according to the report titled, ‘Global Outlook 2019,’ which evaluates 33 global cities.

New Delhi’s prime rental values of Rs 326 per sq ft per month came mainly on the back of constricted fresh supply.

Mumbai’s prime office rentals are expected to remain stable with growth estimated at only 0.3% in 2019. The recorded rental for prime markets in the city is about Rs 300 per sq ft per month, largely because demand has shifted to secondary and peripheral locations due to high rental values in other places.



“The rental growth is also the prime reason for increased interest from institutional investors in acquiring incomeyielding assets in the commercial segment,” said Shishir Baijal, chairman of Knight Frank India.

The vacancy rate is expected to improve to 15% in New Delhi in 2021 from 16.5% in 2018 and to 14% in Mumbai from 19.8%, indicating an increase in employment generation.

The rate for Bengaluru remains at 3.2%, Knight Frank said. “The commercial segment continues to show growth in 2019, much like the year past, when leasing activities breached 46 million square feet and touched a historic high. However, the supply side has not been as robust, keeping rental growth positive,” said Baijal.

Melbourne and Sydney will see the largest rental growth in 2019, with rents rising 10.1% and 8.6%, respectively. Both cities are experiencing tight supply in their office markets due to the sustained strength of employment growth and relatively low levels of completions in recent years. Prime rents rose 13% in Sydney and 6% in Melbourne over the past year.

Across the global markets, uncertainty surrounding trade tensions and political events has led to a pause in the development pipeline.