Gurugram, November, 28, 2018 – India witnessed a robust demand for office spaces in Q3 2018, recording approximately 12.3 million sq ft of gross absorption, indicating a 23% growth over the corresponding period last year. As a result of rising demand coupled with lowering vacancies in premium Grade A buildings, the office rental values have recorded an increase in select micromarkets across cities.

“Key micromarkets in Bengaluru, Kolkata, Pune and Chennai made it to the list of top ten micromarkets, which witnessed maximum YoY rental increase in the range of 9.4% - 32.0% in Q3 2018. Of the top 10 markets, Bengaluru has the highest representation with six markets reinforcing strong occupier preference”, says Ritesh Sachdev, Senior Executive Director, Occupier Services at Colliers International India.

As per Colliers Research, the top 10 office micromarkets that witnessed the highest rental growth YoY in Q3 2018 are as follows:

Bengaluru - Bannerghatta Road

The southern micromarket of Bengaluru, Bannerghatta Road witnessed the highest rental increase of 32% YoY equating to closing rents in the range of INR 70-95 per sq feet per month in Q3 2018. This could be predominantly attributed to low vacancy levels with no visibility on upcoming supply. This quarter recorded some large ticket transactions by occupiers such as Swiggy, Rambus, WeWork and Practo. In the upcoming quarter, the demand is expected to increase from the technology sector and flexible workspace operators as more transactions are in the pipeline.

“The persistent demand from the technology sector should continue to drive leasing activity while flexible workspace operators should further gain traction across cities. We expect rents to appreciate at a CAGR of 2% – 4% over 2018-2021 in most cities, driven by premium buildings in strategic locations”, says Megha Maan, Senior Associate Director, Research at Colliers International India.

Bengaluru – Electronic City

Electronic City in expected to receive an infrastructure upgrade with the near completion of the Namma Metro project by 2022. In anticipation of this, many developers such as Bagmane, Ajmera, Salarpuria Satva, among others are planning commercial development in the micromarket. We expect the demand in this micromarket to increase manifolds. In Q3 2018, there has been a 22.9% YoY rental increase.

Bengaluru – EPIP Zone / Whitefield

EPIP Zone/Whitefield in Bengaluru witnessed a YoY rental increase of 16.3% in Q3 2018. The Namma metro project is expected to start operations by 2022 and aligning with this timeline is a robust supply pipeline of 9.2 million sq feet, which is the largest share in Bengaluru. We expect the rents in this micromarket to exponentially surge at 8.3% compounded annually over 2018-2021.

Bengaluru – CBD

Bengaluru’s Central Business District (CBD) witnessed a gross absorption of 0.3 million sq feet in Q3 2018. There is an increasing demand by flexible workspace operators in this micromarket and we expect a finite supply of 1.5 million sq feet to push rents northwards. In Q3 2018, the CBD witnessed a rental increase of 14.3% YoY.

Bengaluru – Hosur Road

Hosur Road in Bengaluru witnessed a rental increase of 14.3% YoY in Q3 2018 owing to single digit vacancy levels amidst consistent demand by technology, consulting, and flexible workspace operators. A limited supply pipeline of 0.8 million sq feet is expected to inflate rentals further.

Bengaluru – Outer Ring Road (K.R. Puram-Hebbal)

The most active office destination in Bengaluru, Outer Ring Road (ORR), which holds the maximum Grade A office stock of around 50%, furnished the maximum volume of absorption constituting 38% in Q3 2018. We expect a supply pipeline of 7.2 million sq feet by 2021 to temporarily cater to the rising demand. However, infrastructure projects such as the proposed metro construction are expected to waver occupier interest temporarily in this micromarket. In Q3 2018, ORR witnessed a rental increase of 10.7% YoY.

Kolkata – CBD

The Central Business District (CBD) in Kolkata recorded a 10.5% rental increase YoY in Q3 2018. Companies across varied sectors including flexible workspace and manufacturing namely Awfis and Volvo, respectively expanded their office space in this micromarket in Q3 2018. Due to limited availability of Grade A office space amidst consistent demand in the micromarket, the rents have been appreciating.

Chennai – Old Mahabalipuram Road Post Toll

Old Mahabalipuram Road (OMR) Post Toll in Chennai witnessed a 10% rental increase YoY in Q3 2018. The demand for office space is moving from the Central Business District (CBD) to OMR Post-Toll that constitutes 41% of the total office leasing in Q3 2018. The availability of quality contiguous floor plates has led occupiers working with expansion strategy to consider this micromarket.

Pune – Airport Road/Pune Station

Airport Road/Pune Station recorded a 10% rental increase YoY in Q3 2018. About 7% of the gross absorption in YTD 2018 (January to September) in the city was concentrated in the micromarket and was driven by technology occupiers. Due to limited availability in existing stock as suggested by 3% vacancy at the end of Q3 2018, rental values in this micromarket are witnessing an increasing trend.

Pune – Kalyani Nagar

Kalyani Nagar recorded a 9.4% rental increase YoY in Q3 2018. The growing preference of IT-ITeS occupiers for this micromarket can be attributed to its strategic location and its proximity to Kharadi and Hadapsar. Despite being a very small commercial micromarket constituting mere 4% of the overall stock in the city, it is able to command higher rents for it is strategically located in close vicinity to residential hubs and talent pool.

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