JOIN USBengaluru has joined the elite list of global cities in terms of growth in office rental values.
The city's central business district (CBD) has witnessed 4% growth in office rental values during the second quarter of this year. Two other cities ahead of Bengaluru are Phnom Penh and Tokyo.
The rise in rental value was mainly on account of a sustained interest from the IT/ITeS sector, according to the Asia-Pacific Prime Office Rental Index for Q2 2017 by independent property consultant Knight Frank.
The CBD area includes M G Road, Residency Road, Cunningham Road, Vittal Mallya Road and Kasturba Road among others. At present, the rental values in these areas are in the range of Rs 105 per sqft per month compared to Rs 100 per sqft per month in the previous quarter.
Bengaluru recorded 5.8 million sqft of office space transactions in the first six months of 2017, including 3.7 million sqft of new projects. Apart from the IT/ITeS sector, which drove the Bengaluru office market, the co-working space operators accounted for a sizeable quantum of office space during this period.
The rent appreciation in Phnom Penh's City Centre was 4.2% and Tokyo's Central 5 Wards saw 4.1% growth.
The global price index compares rental values of prime office spaces across 20 international markets, and they rose by 1.2% in the quarter ended June 2017. Other established business districts such as Connaught Place in New Delhi also saw a 2.2% climb, courtesy a lull in the supply of new office spaces and dwindling vacancies.
The Bandra Kurla Complex in Mumbai recorded a quarter-on-quarter increase of 2% in rents in the June ending quarter of 2017. Vacancy levels in the financial capital, however, got a boost with a fresh office supply of approximately 5,30,000 squares in the last quarter.
"Despite the global pressures on the IT/ITeS sector triggered by automation and limitation in demand for business, the technology-driven Bengaluru market has performed well and it is expected to do even better. But prime office assets in Mumbai and Delhi are likely to see a slower growth trajectory having already scaled high-rental values,” said Samantak Das, chief economist and national director-research, Knight Frank India.
While Phnom Penh topped the chart this quarter with 4.2% increase, Bangkok, the erstwhile topper, saw its first decline this quarter in close to three years.
"Over the next 12 months, we expect rents in 15 cities out of the 20 markets tracked to either remain steady or increase, which is the same as our previous forecast," Das added.