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Top Indian cities witness growth in Prime Office Rental; Connaught Place is the 4th most expensive office market in Asia Pacific: Knight Frank Survey

29 May 2019

May 29, 2019, MumbaiKnight Frank, an independent global property consultancy, has launched its Asia-Pacific 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. In terms of year-on-year growth, prime office rentals in Bengaluru, Mumbai and Delhi rose positively by 17%, 5% and 1.4% respectively, with gross effective rents in the markets standing at USD 31.2 /sq.m/month, USD 75.1/sq.m/month and USD 82.5/sq.m/month. 

Indian office rents were mostly flat in Q1 with Bengaluru and Mumbai following a strong 2018 performance stemming from chronic undersupply in both markets, solid demand from IT/ITeS tenants in Bengaluru and aggressive co-working expansions in Mumbai. Delhi saw a 1.4% quarter-on-quarter rise in rents, the first growth registered in over 12 months on the back of increasing co-working space demand.

 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.
  • 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 5%, with gross effective rents in the markets standing at USD 31.2/sq.m/month 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
(Q-o-Q)

% change
(y-o-y)

 

 

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 & Managing Director, Knight Frank India. 

 ASIA-PACIFIC 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.