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Bengaluru, Pune and Gurgaon office markets witness highest rental growth

Bengaluru continued to outperform with absorption of 10 million sq ft year to date, says Colliers Research.

Office rental growth continued to surge in cities like Bengaluru, Pune and Gurgaon. With year-to-date absorption of 10 million sq ft, Bengaluru continued to outperform with sustained interest from occupiers. Thus, the upward pressure on rents continued in several Bengaluru micro markets on the back of shrinking vacancy levels. Although rental values in Pune stabilised in the second and third quarters of 2017, they are still relatively higher than the same period last year due to constant supply crunch in the Pune market, says a report by Colliers Research.

In the last few quarters, due to availability of quality Grade A supply and necessary infrastructure, several Gurgaon micro markets have also emerged as a bright spot in the NCR market, thus leading to year-on-year rental growth.

“Gurgaon office real estate market remains the preferred destination for occupiers. Office demand will continue to move northwards in short-to-medium term. Rental values are likely to remain stable across most micro-markets in Gurgaon with expectation of a slight increase in CBD of Gurgaon,” said Sanjay Chatrath, Executive Director, NCR, Colliers International India.

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Surabhi Arora, Senior Associate Director - Research, said: “All the cities in the South and the Pune market are witnessing single digit vacancy rates. While the construction of grade A commercial properties may ease some of the pressures, we do not expect inventory pressure to reverse any time soon. Despite a strong supply pipeline in most of these cities, we expect, the rental values to increase in the short term, especially, in grade A developments.”

Due to its strategic location, proximity to prime residential areas and limited supply, CBD areas like MG Road, Vittal Mallaya Road in Bengaluru CBD continue to reign as preferred micromarkets among occupiers, thus recording a y-o-y rental growth of 16.7 percent, the maximum among all city micro markets. As we are not expecting any significant supply in these areas, we may continue to witness upward pressure on rental values over the next few quarters.

In Gurgaon’s Golf Course Road, about 30 percent of the total leasing volume was concentrated on the Golf Course Road in the third quarter of FY17. It remains a preferred choice for premium occupiers, especially due to its enhanced metro connectivity, thus leading to 14.8 per cent y-o-y rental growth.

As an established IT hub in Gurgaon, Cyber City has continued to draw tenants due to its locational advantages along with presence of premium buildings and good infrastructure. Continued occupier preference and low vacancy rates in this micromarket pushed the average rents by 9.5 percent on y-o-y basis.

In Pune, although Baner is one of the suburban commercial markets in the city, growing demand from occupiers and minimal supply has led to rental growth of 10.9 percent on a y-o-y basis.

In Chennai’s OMR pre-toll micromarket which is an IT-ITeS destination, Taramani, MGR Salai, Kandanchavadi, Perungudi locations witnessed rental growth of 11 per cent y-o-y. Despite continuous upward pressure on rents and low vacancy, the micromarket maintains its preference among occupiers with 51 percent share of total absorption in the third quarter of 2017.

The office market performance in Hyderabad continues to be intense in the Secondary Business District (SBD) and about 80 percent of the total leasing volume in the third quarter of 2017 is concentrated in this micromarket. Being the preferred micromarket in Hyderabad, SBD witnessed about 8 percent  y-o-y increase in rentals. We expect office demand to remain concentrated in this micromarket with robust expansion plans of prominent technology players.
First Published on Nov 1, 2017 09:02 pm
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