Bengaluru office vacancy to rise in H2 2023; retail rentals remain flat: Report

The report pointed out that other than MG Road, rentals across most high streets in the city, such as Brigade Road, Commercial Street, Indiranagar, and Koramangala, remained stable in the first half of 2023 compared to pre-pandemic levels.

With an estimated commercial real estate supply of 11-12 million square feet (msf) getting added in the second half of 2023, vacancy is set to rise over the next few quarters across the commercial segment in Bengaluru, according to a report by commercial real estate association CiRE Development Foundation and real estate developer Puravankara.

H1 2023 recorded a supply of 4.5 msf. Additionally, around 15 msf is expected to enter the market in the next year. Most of the supply is expected across the prime Outer Ring Road (ORR) micro-market, it said.

The city witnessed the leasing of around 5.5 msf of office space in H1 2023, which accounted for almost 15 percent of gross lease volumes in India, though this figure is much lower than in H1 2022.

Interestingly, compared to pre-COVID levels, commercial rentals across north and south Bengaluru remained stagnant in H1 2023. East Bengaluru saw the maximum appreciation of more than 50 percent followed by central Bengaluru at about 30-35 percent on average, it said.

The IT-BPM sector continues to be the major demand driver, accounting for 40 percent of leased space during H1 2023, followed by banking, financial services, and insurance (BFSI) at 25 percent," the report said.

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Additionally, the report added that in H1 2023, the Bengaluru retail sector saw a return of positive investment sentiments with the leasing of around 0.6 msf of space and a supply of about 0.3 msf.

Similar to the office segment, the report pointed out that other than MG Road, rentals across most high streets in the city, such as Brigade Road, Commercial Street, Indiranagar, and Koramangala, remained stable in the first half of 2023 compared to pre-pandemic levels.

Infrastructure, traffic big worries

The report pointed out that the impact of traffic congestion in Bengaluru on commuters' travel time has been exceptionally severe.

"It is astonishing to note that drivers in Bengaluru spend a staggering 260 hours, equivalent to nearly 11 days, stuck in rush hour traffic every year. The reduced productivity resulting from the extensive time spent in traffic leads to substantial economic losses (running into) billions of rupees for the city," the report added.

The report also said that expanding the metro rail network and integrating it seamlessly with the suburban rail system will provide a comprehensive public transportation solution. Seamless connectivity between bus and metro lines and last-mile connectivity is crucial for the overall efficiency of the public transportation network.

Previously, Moneycontrol reported that the impact of traffic on real estate – depreciating property capital values and soaring rents – can be seen in the shifting choices of people.

Corporates spearhead solution

CiRE, which comprises more than 120 corporates, including representatives from Google and Microsoft, has already submitted the report to DK Shivakumar, Bengaluru City Development Minister, and Priyank Kharge, IT/BT Minister.

"We want to take over management of the highly congested 30-km stretch between Silk Board and Hebbal phase-wise. We have already launched campaigns to implement more CCTV cameras, traffic wardens, and control rooms to monitor the congestion across the stretch," Era Chaturvedi, Co-founder of CiRE, told Moneycontrol.

On August 15, the association will be launching another initiative to monitor the illegal dumping of construction and demolition (C&D) waste in Bengaluru.

"We will be working with the local municipal body, Bruhat Bengaluru Mahanagara Palike (BBMP), to launch an app that will track the vehicles carrying the debris to recycling centres. We are already partnering with multiple corporates and developers to expedite the process," Chaturvedi added.