Rising demand and lowering vacancies in premium Grade A buildings led office rental values to rise between 9 percent and 32 percent, says Colliers Research
Demand for office spaces in Q3 CY18 grew 23 percent year-on-year to 12.3 million sq ft. Rising demand and lowering vacancies in premium Grade A buildings led office rental values to rise between 9 percent and 32 percent in select micro markets across cities.
“Key micro markets in Bengaluru, Kolkata, Pune and Chennai made it to the list of top 10 micro markets. Of the top 10 markets, Bengaluru has the highest representation with six markets reinforcing strong occupier preference,” Ritesh Sachdev, Senior Executive Director, Occupier Services at Colliers International India, said.
The southern micro market of Bannerghatta Road (Bengaluru) saw the highest rental increase of 32 percent YoY with rents in the range of Rs 70-95 per sq ft per month in Q3 CY18. This could be predominantly attributed to low vacancy levels, with no visibility on upcoming supply.
Bengaluru’s Central Business District (CBD) witnessed gross absorption of 0.3 million sq ft. Given the rising demand for flexible workspaces in this micro market and finite supply of 1.5 million sq feet, we expect rents to head northwards. In Q3 CY18, CBD saw a YoY rental increase of 14.3 percent.
The Central Business District (CBD) in Kolkata recorded a 10.5 percent rental increase in the same period. Companies across varied sectors including flexible workspace and manufacturing namely Awfis and Volvo, respectively, expanded their office space in this micro market. Due to limited availability of Grade A office space, amid consistent demand in the micro market, rents have been appreciating.“Persistent demand from the technology sector should continue to drive leasing activity, while flexible workspace operators should further gain traction across cities. We expect rents to appreciate at 2-4 percent CAGR over 2018-21 in most cities, driven by premium buildings in strategic locations,” said Megha Maan, Senior Associate Director, Research at Colliers International India.