Knight Frank — International Property Consultant — in its recent report Prime Office Rental Index Q2CY19, noted that the CBD of Bengaluru (MG Road, Residency Road, Cunningham Road, Lavelle Road, Richmond Road and Infantry Road) ranked 5th in terms of y-o-y growth at the end of Q2CY20. The report finds Bengaluru CBD rent grew 9.4 per cent Y-o-Y. Melbourne saw the highest rental growth y-o-y at 16 per cent. Tokyo (12 per cent), Bangkok (10.4 per cent) and Singapore (10.3 per cent) were the other prime office markets that saw higher y-o-y rental growth rates ahead of Bengaluru. Bandra Kurla Complex (BKC) and Connaught Palace, that make up the prime office markets in Mumbai and the NCR respectively, were ranked 8th and 12th at the end of Q2CY19. The Knight Frank Prime Office Rental Index tracks rental levels of 20 front-line cities across the Asia-pacific region.

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Speaking on the report findings Shishir Baijal, Chairman & Managing Director at Knight Frank India said, “The office markets of India have withstood headwinds from global and national economic conditions and depict an impressive growth story. The leasing volumes have grown consistently and are at historic highs, which indicates a high level of confidence that the corporate world has in the India story, especially from a long-term perspective.  Bengaluru has maintained its prime growth market position with its CBD recording the 5th highest rental growth, further strengthening its position. BKC in Mumbai and Connaught Place in New Delhi have also seen growth in rental values, indicating continued interest for transaction from office end-users.”

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 Shishir went on to add, “A strong commercial office market has been at the core of keeping India’s real estate story alive with global investors, who have, despite some slowdown in the residential markets, continued to explore investment opportunities in the market. Strong rental trends will be a force majeure for the growth of investments in this segment going forward.”

Bengaluru CBD saw the highest annual growth in rental values in India, with current rentals at Rs 125 per square foot per month (INR/sq.ft./mth) registering an annual growth of 9.4 per cent in Q2CY19. Regionally, Bengaluru rental values saw the 5th strongest annual growth in rental values. Mumbai’s  BKC which registered a growth of 5 per cent y-o-y in Q2CY19 and was recorded at Rs 300/sq.ft/mth. New Delhi’s Connaught Place recorded a rental value of Rs 330/sq. ft/mth also recorded an annual rise of 1.4 per cent in Q2CY19. 

Indian office rents remained stable in Q2 as the market saw an influx of new supply in H1 2019; 23 million square feet (msf), a 31 per cent year-on-year growth, was supplied during the period. The IT/ITeS sectors continue to absorb the lion’s share of new space coming online, accounting for 35 per cent of all transacted volumes in H1 2019 but has started to show signs of slowing on lower corporate spending and moves towards in sourcing. However, this weakness has been offset by strong demand from co-working operators; co-working transaction volumes rose 42 per cent year-on-year to 4 msqft in H1 2019.