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Bengaluru set to witness 6.6% office rental growth in 2019, third highest globally: Knight Frank Global Outlook Report

This image is for representational purposes only.
This image is for representational purposes only.

In the latest report by Knight Frank – Global Outlook 2019, Bengaluru has emerged as the third fastest growing office market in terms of prime rental values for office space globally. The estimated growth in office rental values in Bengaluru by the end of 2019 is expected to be 6.6% over 2018. New Delhi, which is expected to see a rise of 6.5% in prime rental values in 2019, was recorded as the fourth fastest growing office market globally. The annual report evaluates the upcoming year of 2019, to state that there will be a shift in focus for property investors as they respond to a more uncertain global economy and the rising cost of debt. The report evaluates 33 global cities and gives insight on office rental growth, office occupier forecast, industrial and retail outlook along with other alternate sectors such as logistics, healthcare and hotels.

Bengaluru, which saw a prime rental value of Rs 125 per sq-ft (psf)/ month in 2018, is expected to see a growth in rental value in the range of 6.6% y-o-y by the end of 2019, on account of low Grade-A supply in prime markets. With demand remaining buoyant in the market from the IT/ ITeS and the start-up sectors, the lack of quality space in key markets is pushing the rentals northwards. Mirroring the same trend, New Delhi with prime rental values of Rs 326 psf/month, is also expected to see a rise of approximately 6.5% on the back of constricted fresh supply in 2019.

Key findings from the report

• Bengaluru emerges amongst the top cities worldwide to witness a steep growth in office rentals at 6.6% for 2019.
• Mumbai prime rental values to remain stable at 0.3% possible growth in 2019.
• Bengaluru (13.2%), Mumbai (11.5%) and Delhi (10.1%), to be global hotspots in terms of office rental growth with forecasts by 2021.
• Vacancy rate to improve in New Delhi and Mumbai with current 16.5% (2018) and 19.8% (2018) to 15% (2021) and 14% (2021), indicating an increase in employment generation, whereas Bengaluru remains the same at 3.2%.

Shishir Baijal, CMD, Knight Frank India, said “Commercial segment continues to show growth in 2019, much like the year past when leasing activities breached 46 million sq-ft and touched a historic high. However, the supply side has not been as robust, keeping rental growth positive at the same time. The trend of rental growth in prime markets is expected to continue in 2019 for prime Bengaluru and New Delhi markets, due to continued supply crunch. Mumbai is however expected to see stable rentals in 2019 with an outlook of marginal rental growth due to anticipated supply for 2019 in the prime market. This rental growth is also the prime reason for increased interest from institutional investors in acquiring income yielding assets in the commercial segment.”

Mumbai prime office rentals are expected to remain largely stable with an estimated growth of only 0.3% in 2019. The recorded rental for prime markets in the city is approximately Rs 300 psf/month. This is largely due to demand, which is routing itself to secondary and peripheral locations due to high rental values in prime markets. The prime office market of Bandra Kurla Complex (BKC) is at the verge of witnessing a growth in supply in the upcoming year.

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August 2019
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