Bengaluru Records Highest Rise in Office Rentals in Asia-Pacific: Report

India’s tech hub of Bengaluru saw the highest rise in office rentals in Asia-Pacific in the second quarter of 2018, according to global property consultant Knight Frank. Office rentals in the Karnataka capital rose 7 percent in the Central Business District area in the quarter ending June 2018 as opposed to the first quarter.

The rise is mostly because of tight supply and increased demand from corporates and co-working firms, according to Knight Frank. Companies prefer to have offices in CBD due to its proximity to business and tech hubs, well-connected transport, location, and easy access to other parts of the city.

“Steady demand seen in the prime office market is expected to bolster rental growth for the second half of the year. Despite several headwinds, including tensions around trade, regional economic growth continues to fuel demand for Grade-A office space,” Nicholas Holt, Asia Pacific Head of Research at Knight Frank, said.

With 5.5 percent rise, Tokyo came second, followed by the  Australian cities of Melbourne and Sydney.

Although comparatively cheaper than other Indian and Asian cities, Bengaluru, at $18.4 or Rs 1,367 per square meter, saw the steepest rise in office rentals, as corporates preferred to rent office in the city’s CBD, putting pressure on supply and forcing office owners to hike rentals.

Among other Indian cities that the firm studied, only Bandra-Kurla Complex in Mumbai saw a marginal increase while Connaught Place in New Delhi did not see any change from the first quarter.

Photo: https://www.knightfrank.com

The Q2 grew at almost three times that of Q1 and the main driver was a strong performance from Bengaluru, Tokyo, Hong Kong, and Sydney – the markets facing supply constraints. Rents will remain steady or see a marginal increase for the remainder of the year, the company said in its report.

Among other Asian cities, Tokyo’s Central 5 Wards Grade-A rents grew 5.5 percent as the supply-starved market saw vacancy levels fall a 10-year low to 1.1%. In Hong Kong’s Central district, rents went up by 1.7 percent as the major financial district is nearing full occupancy. In Sydney, rents increased 4.2 percent as the supply-demand imbalance from last year’s strong white-collar growth and stock removal continues to be felt, according to the report.

During the first half of 2018, close to 3.7 million sq. ft. of office space in Bengaluru was taken on rent, the highest in India, signaling that real estate activity is at its peak in the city and businesses are expanding, according to Deccan Herald.