Rising demand coupled with shrinking vacancies in Grade A and premium Grade A office spaces has led to rental rise of about 2.8 percent to 11 percent quarter-on-quarter
Office space leasing has risen 12.6 million sq ft on the back of rising demand, a 10 percent sequential rise in the second quarter ending June 2018. Rising demand coupled with shrinking vacancies in Grade A and premium Grade A office spaces led to a 2.8-11 percent quarter-on-quarter rental rise in micromarkets such as Kolkata, Mumbai, Pune, and Bengaluru, says Colliers Research.
“As a result... office rental values have recorded an increase in most of the preferred micro markets across cities” says Ritesh Sachdev, senior executive director, Occupier Services at Colliers International India.
Demand from technology and finance sectors is expected to remain consistent while flexible workspaces is likely to gain prominence across cities.
“We expect 3 percent to 5 percent year-on-year increase in average rents over the next three years. Additionally, premium buildings in strategic locations should contribute to the bulk of these rent increases”, says Surabhi Arora, senior associate director, Research at Colliers International India.
Kolkata’s Central Business District (CBD) recorded about 11 percent quarter-on-quarter growth in rents. Companies in banking sector such as RBL Bank and HDFC ERGO expanded their office space in this micromarket in the second quarter of 2018.
Proximity to airport is one of the key drivers for Kolkata’s CBD. However, limited availability of Grade A office space is likely to remain a challenge for occupiers looking to take up space in this micromarket, says Colliers Research.
Mumbai's Powai recorded a 6.3 percent quarter-on-quarter surge in rentals. Occupiers from diverse sectors such as engineering, manufacturing, logistics and flexible work space operators were active in taking up space in 2018. Due to limited availability in existing stock as suggested by 3 percent vacancy, rental values in this micro market are witnessing an increasing trend, says the research.
Navi Mumbai is evolving as one of the key destination for office occupiers in recent times and has recorded 5.9 percent rental rise in the second quarter of 2018. In the first half of 2018, office demand in this micro market, which constituted 6 percent of the total absorption recorded in the city was driven by varied sectors including pharmaceutical, manufacturing, BFSI, IT/ITeS and flexible work space operators. The micro market is expected to command higher rents going forward aided by increasing demand from BFSI sector for their back-office operations, it says.One of the emerging micro market in Bengaluru, North (Hebbal-Yelahanka) saw a quarter-on-quarter rental increase of 5.1 percent in the second quarter of 2018. The micro market is fast rising with Hebbal catering to the spill over demand from Outer Ring Road (ORR) and availability of large floor plates in this micro market has been enticing occupiers in 2018. Occupiers from various sectors such as consulting, engineering and manufacturing and a few flexible work space operators have taken up space in North Bengaluru in the second quarter of 2018, it says.