Bengaluru sees highest growth in office lease rentals

India’s technology capital Bengaluru has retained its pivotal position in pan-India office space leasing and rental yields during the first half of 2018.

While the city has cornered 34% share of total leasing of office space at 8.2 million sq feet out of a total of 24 million sq feet during the first six months of 2018, it has seen a highest growth of 10% in rental values across key markets in the country.

The average rental values have gone up to Rs 77 per sq feet per month in Bengaluru. Among other cities, NCR and Mumbai have seen a rise of 8.6% at Rs 95 and 6.3% at Rs 145 per sq feet, respectively during the second quarter, according to data from Colliers International India, a global property consultant.

Average city rents of other cities such as Pune, Hyderabad and Chennai stand at Rs 67 per sq feet per month, Rs 43 per sq feet per month and Rs 40 per sq feet per month, respectively.

“Availability of huge talent pool, lower rents in comparison to Mumbai and NCR, increasing demand from the technology sector to expand their existing facilities in the IT capital are the key factors driving the growth in rental yields in Bengaluru,” Ritesh Sachdev, Senior Executive Director, Occupier Services, Colliers International told DH.

Among the micro markets in Bengaluru, Outer Ring Road (ORR) continued its dominance as the most popular micromarket in 2018 accounting for 50% of overall demand. Other popular micro markets include the Central Business District (CBD), accounting for 20% of demand, the Secondary Business District (SBD) accounting for 12%, Whitefield for 9% and North Bengaluru for 6% of demand, Colliers International data revealed.

Technology companies expanding drove demand in second quarter, representing 45% of the total office leasing volume. This was closely followed by flexible workspace accounting for 26%, engineering and manufacturing at 16%, and the banking sector accounting for 11% of leasing volume.

Bengaluru is set to witness a gross absorption of 14 million sq feet by the end of 2018, which is mainly driven by information technology parks. “Pre-commitments by occupiers will give developers an incentive to adhere to completion timelines. We expect additional supply of 23.7 million sq feet by 2018-2021,” Colliers International said.

The average rents are expected to increase by 3-4% annually over 2018-2021. The ongoing Whitefield Metro corridor and onset of the ORR metro are expected to provide an additional boost to rents in the coming years, the Colliers International added.