Colliers expects rent in the two cities to grow at 4.1 percent a year between 2018 and 2021 and sees the growth rate sustaining for several years after
Technology companies that rent office spaces in India will continue to prefer Bengaluru and Hyderabad over other cities over the medium term, according to a new report by Colliers.
These companies' demand for office space in Bengaluru and Hyderabad will drive rent growth there. Colliers expects rent in the two cities to grow at 4.1 percent a year between 2018 and 2021 and sees the growth rate sustaining for several years after.
Given the stable outlook for rental income, capital values in the two cities are also expected to rise at a similar 3-4 percent rate.
This would mean that Bengaluru's high net yield of 8.9 percent persists, driving continued investor demand for office assets, Colliers said in the report, which was titled 'Top Occupier Locations in Asia: Implications for Investors'.
The Indian office space market is dominated by technology companies, which account for 60–70 percent of the total gross absorption. And Bengaluru, with office stock of 141 million sq ft (13.1 million sq m) represents about a quarter of the national total.
From an investment perspective, Indian cities, notably Bengaluru, offer high growth potential in the long run, in terms of both rent and capital value. With its significantly high net yield, Bengaluru also happens to be Asia's highest-yielding major office market.
The report is based on a comprehensive study of 16 cities in developed and emerging markets across Asia and examines 50-60 criteria across socio-economic, property and human factors to determine the best occupier locations in Asia.“The investment momentum in Indian realty is expected to continue in the back drop of policy reforms and enhanced transparency coupled with strong growth fundamentals in cities such as Bengaluru. The measures taken by the government to improve the business environment has already started getting reflected in indicators like India’s 'ease of doing business' ranking which would further increase the attractiveness of India as an investment destination," said Joe Verghese, Managing Director, Colliers International India.