Office rental growth in CBD of NCR expected to remain stable

Bengaluru CBD expected to see more supply coming in 2020, demand to stay steady

Mumbai, December 25, 2019 (GPN) : Office market in India will continue to be robust despite sluggish economic growth, with international property consultant Knight Frank in its recent report – Asia-Pacific Outlook Report 2020 – projecting an increase in office rentals in the Central Business Districts (CBDs) of Bengaluru and Mumbai in 2020, while the rental growth in the CBD in National Capital Region (NCR) is expected to remain stable.

The CBD of Bengaluru, comprising areas such as MG Road, Infantry Road and Residency Road, is expected to see more supply coming in 2020, while the demand is expected to remain steady as the IT sector continues to expand.

Grade-A office rents across the Asia-Pacific region are expected to fall between 0 and -3% in 2020, down from the 0.6% rise in the first nine months of 2019, as occupier demand continues to soften.

Australia continues to provide investors with attractive investment propositions, given its higher yields relative to other developed markets. In 2020, Australian commercial and industrial real estate is expected to see another year of double-digit total returns, with capital growth accelerating in response to lower interest rates.

The CBD of Bengaluru was the best performing market in Asia Pacific in Q3 2019, with a rental growth of 17.6%, according to Knight Frank Asia-Pacific Prime Office Rental Index Q3 2019.The CBDs of Connaught Place in National Capital Region (NCR) and Bandra Kurla Complex (BKC) in Mumbai were the 7th and 11th fastest-growing prime office markets in the Asia-Pacific region, respectively, with a comparatively modest 4.4% and 2% YoY rental growth in Q3 2019.

Asia-Pacific Prime Office Rent

(As of Q3 2019)

Markets	City	Local Measurements^	Prime Net Headline Rent	2019 % Change*	Vacancy	Forecast for next 12 months
India	Bengaluru	INR/sqft/annum	1,615	8.0%	4.0%	Increase
India	Mumbai	INR/sqft/annum	3,640	1.1%	18.4%	Increase
India	NCR	INR/sqft/annum	4,079	4.4%	16.4%	Same
Australia	Brisbane	AUD/sq m/annum	613.0	2.2%	9.6%	Increase
Australia	Melbourne	AUD/sq m/annum	694.0	8.8%	2.2%	Increase
Australia	Perth	AUD/sq m/annum	610.0	3.2%	14.8%	Increase
Australia	Sydney	AUD/sq m/annum	1,165	4.9%	3.0%	Increase
East Asia	Tokyo	JPY/tsubo/month	39,624	0.4%	0.6%	Same
East Asia	Beijing	CNY/sq m/month	360	-3.6%	10.1%	Decrease
East Asia	Guangzhou	CNY/sq m/month	193.4	0.4%	8.0%	Same
East Asia	Shanghai	CNY/sq m/month	282.9	-4.1%	12.1%	Decrease
East Asia	Hong Kong	HKD/sqft/month	150.5	-8.1%	3.9%	Decrease
East Asia	Taipei	TWD/ping/month	2,788	2.0%	5.5%	Increase
East Asia	Seoul	KRW/sq m/month	33,816.6	0.1%	9.7%	Same
ASEAN	Phnom Penh	USD/sq m/month	23.6	0.5%	12.4%	Same
ASEAN	Jakarta	IDR/sq m/annum	4,200,624	0.0%	23.0%	Same
ASEAN	Kuala Lumpur	MYR/sqft/month	5.9	1.5%	22.5%	Decrease
ASEAN	Singapore	SGD/sqft/month	10.35	1.9%	9.9%	Increase
ASEAN	Bangkok	THB/sq m/month	1,129	4.7%	8.1%	Same
ASEAN	Manila	PHP/sq m/month	1,095	5.1%	8.0%	Decrease

^Based on net floor areas except for China, India, Korea, Taiwan, and Thailand (gross) *January 1, 2019 to September 30, 2019
** Inclusive of incentives, service charges and taxes. Based on net floor areas. Source:Knight Frank Research

 “Office markets in cities like Mumbai, NCR and Bengaluru continue to enjoy healthy rental growth, despite the weaker economic sentiment in 2019, mainly due to the rapid expansion witnessed in its IT industry. Multinationals continued to expand robustly especially in Bengaluru because of availability of the right talent pool and new office assets at comparatively low rents. We expect the trend to continue for these markets as the demand for office space is expected to grow in 2020 as well,” said Shishir Baijal, Chairman and Managing Director of Knight Frank India.

In the latest survey – Knight Frank – FICCI – NAREDCO – ‘Real Estate Sentiment Index Q3 2019’,majority (82%) of the real estate stakeholders have expressed an optimistic outlook for office sector, backed largely by a robust office supply pipeline for the next six months. Real estate stakeholders also expect the rentals for Grade A office spaces to inch up in the next six months. ENDS