Bengaluru recorded the highest office rental growth in the Asia-Pacific region (APAC market), followed by Mumbai and National Capital Region (NCR), among the Indian cities, according to Knight Frank's Asia-Pacific Prime Office Rental Index Q4 2022.
Bengaluru witnessed a prime rental growth of 11 percent year-on-year (YoY) in the fourth quarter of 2022. Followed by Mumbai (2nd on APAC Prime Office Rental Growth), where prime office rents witnessed a rise of 7 percent YoY while NCR (13th on APAC Prime Office Rental Growth) office rentals remained stable in Q4 2022.
"Quarterly, prime rents in all three cities (Bengaluru, Mumbai, and NCR) remained stable. Prime rentals in all the three Indian cities are expected to increase over the next 12 months backed by healthy demand," the report added.
The APAC market includes East Asia, South Asia, Southeast Asia, and Oceania, along with 20 countries, including China, India, and, Indonesia.
"While the Indian economy recovers gradually, global economic cues remain tense as inflation continues to trigger more liquidity tightening measures across the globe. With the pandemic having a little material impact on businesses, the evolving story of global economic growth could have a greater bearing on market traction going forward," Shishir Baijal, Chairman and Managing Director of Knight Frank India said.
Auckland, Singapore, and Bangkok held the rest of the top three positions on the list for rental growth. However, the report forecasted that Bangkok may see a dip in rental growth over the next 12 months.
The report said that the index dropped by 1 percent quarter-on-quarter (QoQ), marking the second consecutive quarterly decline since Q2 2022.
"This indicates that businesses across the region are tightening their capital expenditures in anticipation of potential market downturns. Despite the quarterly dips, the overall index is still up by 0.8% year-over-year at the end of Q4 2022," the report added.
Occupancy cost
Amongst the Indian cities, NCR recorded an occupancy cost of USD 78.7 per square feet (sq ft) per year followed by Mumbai with USD 70.8 per sq ft per year and Bengaluru with USD 36.3 per sq ft per year.
Hong Kong SAR recorded the highest cost of USD 174.3 per sq ft per year in Q4 2022, followed by Singapore at USD 109 per sq ft per year and Tokyo at USD per 92.8 sq ft per year.
"According to the index, 16 out of the 23 cities tracked for their respective prime office rentals reported stable or increasing rents in Q4 2022, an increase compared to the 15 cities in the previous quarter. Auckland led the quarterly rental growth at 4.9%, followed by Bangkok at 3.3% in Q4 2022," the report added.
Market conditions in 2023 will continue to favour tenants as more highly amenitised buildings with sustainability credits will be ready for occupancy, the report predicted.
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