Bengaluru, 12 February 2019- Bengaluru retained its leading position in office leasing among the seven major cities in India, representing 28% of pan-India leasing volume despite 2018 witnessing 14 million sq ft of gross absorption, a decline of 9% YoY. The last quarter of 2018 witnessed 2.6 million sq feet of gross leasing, which is a 30% decline from the previous quarter. However, we expect Bengaluru to continue with an average annual leasing momentum of 14.1 million sq feet over 2018-2021.
Demand for Grade A office space in Q4 2018 was driven by expansion and relocation by technology occupiers, accounting for 56% of total leasing volume. Other sectors driving demand were the banking sector with 11%, engineering and manufacturing with 9%, and flexible workspace operators with 7%.
“Occupiers will retain confidence in Bengaluru as it is one of the fastest growing cities in Asia and offers the requisite pool of talent for tech occupiers. In addition to this, they should consider pre-leasing space as the rents are expected to rise said Arpit Mehrotra, Senior Director, Office Services (Bengaluru & Hyderabad) at Colliers International India”.
Despite a decline in the number of deals in 2018 compared to the previous year, the average lease increased from 48,000 sq feet in 2017 to 55,340 sq feet in 2018. Large deals over 100,000 sq ft constituted around 70% of the total gross leasing in 2018, implying an increase in business confidence. Outer Ring Road (ORR) continued to garner occupier interest resulting in 48% of the total gross leasing in 2018. Other micromarkets that saw notable transaction activity were the Secondary Business District (SBD) with 15%, and the Central Business District with 12%. The CBD is gaining traction mainly from flexible workspace operators. Other micromarkets such as Whitefield and North Bengaluru recorded 7% and 6% of gross leasing, respectively.
The fourth quarter of 2018 witnessed notable supply of 2.86 million sq feet, a threefold increase from the previous quarter. However, 2018 overall witnessed a decline of 37% compared to the previous year, with only 8.0 million sq ft of Grade A supply. Developers are optimistic for Bengaluru’s increasing demand for Grade A office space and have launched a further round of new projects. Thus, the forecast has been revised to 36.8 million sq ft of Grade A supply over 2019-2021.
ORR continues to be the most active micromarket, hosting 37% of the upcoming supply. This is followed by Whitefield with 27%, North Bengaluru with 15%, SBD with 8% and the remaining in locations such as CBD, Electronic City and others accounting for 13% of the total upcoming supply over 2019-2021
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