Bengaluru, India’s tech hub, has seen the highest increase in office rental values in Asia-Pacific during the second quarter of 2018, overtaking other global cities.
The office rentals have gone up 7% in the three months ended June compared to the previous quarter in the Central Business District (CBD) in Bengaluru. The rise in prices was mainly on account of tight supply and increased demand from corporates in the IT/ITeS and co-working space.
With this, Bengaluru has overtaken other global cities such as Tokyo, Hong Kong and Sydney in Asia-Pacific region, global property consultancy Knight Frank data revealed.
According to the Asia-Pacific Prime Office Rental Index released by Knight Frank on Tuesday, the office rental values in Bengaluru touched $18.4 per sq metre (1 sq metre is 10.764 sq feet) for the quarter ended June 2018. However, on a year-on-year basis, Bengaluru witnessed 8.5% rise in office rentals.
Though rentals in Bengaluru's CBD had stagnated in the previous two quarter, heightened occupier demand from co-working and IT/ITeS segments caused many developers to charge a premium for available spaces, Knight Frank said.
For the other markets in India such as Mumbai and Delhi NCR, rental growth was generally flat this quarter. The Mumbai market witnessed stable rentals although the outlook in terms of rental growth remains positive.
Incidentally, Bengaluru is the only Indian city to figure in the list of top global cities in Asia-Pacific that has seen a rise in rental values. Two other Indian cities- Mumbai and NCR - have not seen any rise in rentals during the second quarter.
Among other global cities, the Central 5 Wards area in Tokyo has seen a 5.5% rise in office rentals, CBD area in Melbourne has witnessed 4.6% rise, followed by 4.2% increase in CBD area of Sydney.
Over the next one year, prices are expected to go up further in Bengaluru and Mumbai, while they may remain at same level in NCR.
“Shortage of quality spaces has led to a 7% quarter-on-quarter rental growth in Bengaluru’s Central Business District (CBD) in Q2 2018. Corporate occupiers are jostling for quality space within the tightly supplied CBD and off-CBD districts, with many of them navigating the issue by pre-committing to upcoming supply,” said Arvind Nandan, Executive Director - Research, Knight Frank said.
During the first half of 2018, Bengaluru has absorbed 3.7 million sq feet of office space.