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Bengaluru set to witness 6.6% office rental growth in 2019, third highest globally: Report

New Delhi, which is expected to see a rise of 6.5 percent in prime rental values in 2019, was recorded as the fourth fastest growing office market globally

Bengaluru has emerged as the third fastest growing office market in terms of prime rental values for office space globally. The estimated growth in office rental values in Bengaluru by end of 2019 is expected to be 6.6 percent over 2018, as per a new report.

New Delhi, which is expected to see a rise of 6.5 percent in prime rental values in 2019, was recorded as the fourth fastest growing office market globally, according to the Knight Frank- Global Outlook 2019 report.

Bengaluru, which saw a prime rental value of Rs 125 per square foot per month in 2018, is expected to see a growth in rental value in the range of 6.6 percent year-on-year by the end of 2019, on account of low Grade A supply in prime markets.

With demand remaining buoyant in the market from the IT/ ITeS and the start - up sectors, the lack of quality space in key markets is pushing the rentals northwards. Mirroring the same trend, New Delhi with prime rental values of Rs 326 psf /month, is also expected to see a rise of approximately 6.5 percent on the back of constricted fresh supply in 2019, it says.

Other findings include Mumbai prime rental values to remain stable at 0.3 percent possible growth in 2019; Bengaluru (13.2%), Mumbai (11.5%) and Delhi (10.1%), to be Global Hotspots in terms of office rental growth with forecasts by 2021.

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Vacancy rate to improve in New Delhi and Mumbai with current 16.5 percent (2018) and 19.8% (2018) to 15% (2021) and 14% (2021), indicating an increase in employment generation, whereas Bengaluru remains the same at 3.2 percent, says the report.

The annual report evaluates the upcoming year of 2019, to state that there will be a shift in focus for property investors as they respond to a more uncertain global economy and the rising cost of debt.

The report evaluates 33 global cities and gives insight on office rental growth, office occupier forecast, industrial and retail outlook along with other alternate sectors such as logistics, healthcare and hotels.

“Commercial segment continues to show growth in 2019, much like the year past when leasing activities breached the 46 million square feet and touched a historic high. However, the supply side has not been as robust, keeping rental growth positive at the same time,” says Shishir Baijal, chairman and managing director, Knight Frank India.

“The trend of rental growth in prime markets is expected to continue in 2019 for prime Bengaluru and New Delhi markets, due to continued supply crunch. Mumbai is however expected to see stable rentals in 2019 with an outlook of marginal rental growth due to anticipated supply for 2019 in the prime market. This rental growth is also the prime reason for increased interest from institutional investors in acquiring income yielding assets in the commercial segment,” he says.

The report highlights that Melbourne and Sydney will see the largest rental growth in 2019 with rents rising 10.1 percent and 8.6 percent respectively. Both are experiencing tight supply in their office markets due to the sustained strength of employment growth and relatively low levels of development completions in recent years. Prime rents have been rising rapidly in both markets, up by 13 percent in Sydney and 6 percent in Melbourne over the past year.
Moneycontrol News
first published: Feb 14, 2019 06:12 pm

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