News: Office rentals in Bengaluru, Pune & Gurgaon continue uptrend in Q3: Report-01.11.2017

Office rentals in Bengaluru, Pune & Gurgaon continue uptrend in Q3: Report

The rental growth in several micromarkets across India, particularly in cities like Bengaluru, Pune and Gurgaon continued to surge during the quarter ended September. Bengaluru office property market continued to outperform other markets with 10 million sq ft absorption recorded in the first nine months of 2017, showed a Colliers International India report.

Shrinking vacancy levels built the upward pressure on rental in several micro-markets of Bengaluru. Although rental values in Pune stabilised in the second and third quarter, they are still relatively higher than the same period last year due to constant supply crunch in Pune market.

In the last few quarters, due to availability of quality Grade A supply and necessary infrastructure, several Gurgaon micromarkets have also emerged as a bright spot in the National Capital Region market, thus leading to year-on-year rental growth.

“All the south cities and Pune market are witnessing single digit vacancy rates. While the construction of grade A commercial properties may ease some of the pressures, we do not expect inventory pressure to reverse any time soon. Despite a strong supply pipeline in most of these cities, we expect, the rental values to increase in the short term, especially, in grade A developments”, says Surabhi Arora, Senior Associate Director, Colliers Research.

In Bengaluru, due to its strategic location, proximity to prime residential areas and limited supply, CBD areas like MG Road, Vittal Mallaya Road continue to reign as preferred micromarkets among occupiers, thus recording an on-year rental growth of 16.7%, the maximum among all city micromarkets.

During the quarter, Outer Ring Road (ORR) remained the preferred location with major contribution of 74% in the total absorption. Although the future supply pipeline in this micromarket is likely to complement demand, it is the most sought after location in Bengaluru. Owing to the same, rental values inched up by 7.1%, the report added.

In Gurgaon, around 30% of the total leasing volume was concentrated on the Golf Course Road during the quarter. The location remained a preferred choice for premium occupiers, especially due to its enhanced metro connectivity, thus leading to 14.8% on-year rental growth. As an established IT hub in Gurgaon, Cyber City has continued to draw tenants due to its locational advantages along with presence of premium buildings and good infrastructure. Continued occupier preference and low vacancy rates in this micromarket pushed the average rents by 9.5% on y-o-y basis.

“Gurgaon office real estate market remains preferred destination for occupiers. Office demand will continue to move northwards in short-to-medium term. Rental values are likely to remain stable across most micro-markets in Gurgaon with expectation of a slight increase in CBD of Gurgaon”, said Sanjay Chatrath, Executive Director, NCR, Colliers International India.

In Pune, growing demand from occupiers and minimal supply has led to rental growth of 10.9% in Baner. The Hadapsar/Fursungi market also witnessed 10.2% rental growth. Rents increased 10.1% y-o-y basis in Kharadi owing to severe supply crunch and keen interest from occupiers. However, rentals are set to stabilise due to strong supply pipeline that is expected over the next 3-4 years, Colliers said.

The IT-ITeS destination of Chennai, the OMR Pre-Toll micromarket, comprising Taramani, MGR Salai, Kandanchavadi, Perungudi locations witnessed rental growth of 11% y-o-y. Despite continuous upward pressure on rents and low vacancy, the micromarket maintains its preference among occupiers with 51% share of total absorption during the quarter.

The office market performance in Hyderabad continues to be intense in the Secondary Business District (SBD) and about 80% of the total leasing volume during the quarter is concentrated in this micromarket. Being the preferred micromarket in Hyderabad, SBD witnessed about 8% y-o-y increase in rentals.