Office space rentals grow double-digit in key markets

Rental values of prime commercial office space in select micro markets of Bengaluru have seen a double-digit growth over the last six months owing to a strong demand from IT/ITeS, BFSI and startup clients as well as lower vacancy.

Rentals have increased between 10% and 17% across the micro-markets spread along the central business district (CBD), secondary business district (SBD) and peripheral business districts (PBD) in Bengaluru during the last two quarters ended March 2019, according to global real estate consultancy Knight Frank.

“The increase in rentals was largely driven by a strong demand from IT/ITeS, startups and BFSI sectors. The growth was visible across Whitefield, Outer Ring Road, Electronics City and Hebbal areas other than the CBD,” Shantanu Majumdar, Director, Knight Frank India told DH.

The ongoing Metro rail work in Whitefield area is contributing largely to the price rise and it is expected to witness a strong 15-20% rise in rentals by the time the project is completed, he said.

For the three-month period from January to March 2019, Bengaluru has absorbed 3.6 million sq. feet office space.

The new supply, which is ready to transact, has been pegged at 6.1 million sq. feet. During 2018, Bengaluru witnessed 15.4% jump in absorption of office space at 13.5 million sq. feet compared to 11.7 million sq. feet in 2017.

For the first time, Sarjapur and Marathahalli areas have seen three-digit mark (Rs 65-100 per sq. feet per month) in rental values. “Shortage of quality spaces in CBD, Off CBD and ORR coupled with a low vacancy level led to a strong 17% growth in rentals. The lease rentals in CBD area are in the range of Rs 80-160 per sq. feet per month for properties ready for interiors (warm shell basis),” Majumdar said.

The rental prices in ORR are in the range of Rs 65-100 per sq. feet, Whitefield Rs 40-55 per sq. feet and Electronic City are priced at Rs 35-45 per sq. feet per month. Metro brings cheer to Whitefield

Meanwhile, the ongoing Metro rail project work has brought cheer to the property developers in Whitefield.

The rental values in Whitefield area are expected to jump 15-20% once the Bangalore Metro project work is completed.

Whitefield, which is part of the peripheral business district in East Bengauru has already witnessed a rise of 10% in rentals.

Real estate developers are holding a large land parcel along the IT corridor of Whitefield and are gearing up to launch new projects, Majumdar said.

As strong occupier demand has continually outpaced new supply, the vacancy rate in Bengaluru’s office market has been on a decline and remains at 4%, which is the lowest in the country.