Top Indian Cities Witness Growth In Prime Office Rental; Connaught Place is 4th Most Expensive Office Market In Asia Pacific: Knight Frank

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    Bengaluru sees highest yearonyear growth in India. Mumbai and Delhi also witness upward swing

    May 29, 2019, Mumbai – Knight Frank, an independent global property consultancy, has launched its AsiaPacific Prime Office Rental Index for Q1 2019 that tracks prime office rental movement across key markets of Asia. The index recorded a decline of 0.4% quarter-on-quarter in Q1 2019, though it remains up 6.2% year-on-year basis. Index decline was attributed to continued heightened global uncertainties led by US-China trade tension re-escalation, Brexit and various major elections across the region.

    However, bucking the trend and despite the recently concluded elections, Indian cities like Bengaluru, Mumbai and the National Capital Region (NCR) see a promising growth with a stable to increase in Prime Office Rental forecast. Indian office rents grew in Q1 with Bengaluru and Mumbai rising 17% and 5% year-on-year (YoY) respectively following a strong 2018 performance stemming from chronic undersupply in both markets, solid demand from IT/ITes tenants in Bengaluru and new space take-up by occupiers in Mumbai, Delhi saw a 1.4% (YoY) rise in rents in the prime office market.

    ASIA-PACIFIC PRIME OFFICE RENTAL INDEX/ Knight Frank
    ASIA-PACIFIC PRIME
    OFFICE RENTAL INDEX/ Knight Frank

    KEY FINDINGS

    • Of the 20 Asian cities tracked by the index, 15 recorded either stable or increased rents; two less than the 17 reported in the previous quarter.
    • While prime office rents were mostly flat in Q1 with Bengaluru and Mumbai 17% and 5% year-on-year (YoY), respectively following a strong 2018 performance stemming from chronic undersupply in both markets, solid demand from IT/ITeS tenants in Bengaluru and new space take-up by occupiers in Mumbai.
    • New Delhis Connaught Place recorded gross effective rents of USD 82.5 /sq.m/month which stacked up as the fourth most expensive office location in Asia Pacific behind Hong Kong, Tokyo and Singapore. Mumbai BKC with effective rents of USD 75.1 /sq.m/ month was the seventh most expensive office location.
    • In terms of year-on-year growth, prime office rentals in Bengaluru and Mumbai grew positively by 17% and 6%, with gross effective rents in the markets standing at USD 31.2 and USD 75.1/sq.m/month.
    • NCR Prime Office space denoted by Connaught Place saw a 1.4% quarter-on-quarter rise in rents. The office rental for the prime market currently stands at USD 82.5/sq.m/month, making it the 4th most expensive office market in Asia.
    • Prime office rental forecasted to increase in Bengaluru and Mumbai. NCR set to maintain the current market tone
    INDIA PRIME OFFICE RENTAL 

    City Submarket Q1 2018 Q4 2018 Q1 2019 % change
    (QoQ)
    % change
    (yoy)
        Rental Values (INR / Sq.ft / Month)    
    Bengaluru CBD 107 125 125 0% 17%
    Mumbai BKC 286 300 300 0% 5%
    New Delhi Connaught Place 326 326 330 1.4% 1.4%

     

    The office space demand witnessed record growth in 2018 with over 47 million square feet (msf) of leasing, while new office space supply rose by 13% in the same period. Prime office markets are already operating with very low vacancy which is slowing down new transactions. Strong demand trends have put upwards pressure on rentals, especially in prime markets, a trend that is expected to continue, said Shishir Baijal, Chairman & Director, Knight Frank India.

    ASIAPACIFIC PRIME OFFICE RENTS 

    City Submarket(s) 12 months % change (Q1 2018 – Q1 2019) 3-month % change (Q4 2018 – Q1 2019) Forecast next 12 months
    Brisbane CBD 2.9% 0.3% Increase
    Melbourne CBD 17.1% 2.8% Increase
    Perth CBD 0.7% 0.0% Increase
    Sydney CBD 8.3% 1.1% Increase
    Tokyo* Central 5 Wards 10.6% -1.9% Same
    Beijing Various -1.1% -1.4% Decrease
    Guangzhou CBD 2.5% 0.0% Same
    Shanghai Puxi, Pudong -1.0% -2.1% Decrease
    Hong Kong Central 3.2% -1.6% Decrease
    Taipei Downtown 1.8% 1.0% Increase
    Seoul CBD, GBD, YBD -0.2% 0.2% Same
    Bengaluru CBD 17.0% 0.0% Increase
    Mumbai BKC 5.0% 0.1% Increase
    NCR Connaught Place 1.4% 1.4% Same
    Phnom Penh City Centre 0.6% 0.5% Same
    Jakarta CBD -16.0% 0.0% Same
    Kuala Lumpur City Centre -1.4% -0.3% Decrease
    Singapore Raffles Place, Marina Bay 23.7% 1.5% Increase
    Bangkok CBD 11.6% 6.1% Increase
    Manila Various 9.4% 3.5% Decrease

    Source: Knight Frank Research / *Sanko Estate

    The report also highlights that 9 Asia Pacific markets are set to witness an increase in prime office rental while 6 markets are likely to stay stable.    

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