Bengaluru has emerged as a prime global office destination with Grade A office spaces at affordable prices and access to a large talent pool and cosmopolitan culture. The city’s commercial space market continues to grow from strength to strength, with the current absorption pegged at 3.25 million sq. ft. for the first half of 2017. The city’s commercial real estate market remained positive despite last year’s demonetization drive and this is reflected by the steady growth in demand for office space.
Quantum of Commercial Space Transactions
The last two years have witnessed an exponential growth in Bengaluru’s commercial space market in comparison to other cities. The city has bested Delhi NCR and Mumbai not only in terms of commercial space transactions but also in the quantum of Grade An office stock. Bengaluru has retained its position as the leading office hub of the country and accounts for more than a third of the share of total absorption across eight major cities.
Best rentals for prime commercial stock
Bengaluru offers a significant advantage over other leading commercial hubs in the form of attractive rentals. As a result of low land values and controlled appreciation across micro markets, rentals still remain under check in Bengaluru. Average rentals in the Central Business District (CBD) are in the range of 105-115 per sq. ft., which is a fraction of rentals in the CBDs of Delhi NCR and Mumbai. This rental arbitrage is a strategic advantage for the city’s commercial space market and continues to attract corporate interest.
IT/ITeS, back-office operations and BFSI drive demand
Traditionally, the IT/ITeS sectors, back-office operations as well as BFSI have been the principal demand drivers for office space in Bengaluru. During the first half of this year, organizations belonging to engineering and manufacturing, BFSI and IT/ITeS segments were the main occupiers of space, followed by research and consulting sectors.
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Robust micro markets
Due to the demand for quality Grade A stock, Bengaluru has registered vacancy levels between 8-9 percent leading to a surge in rental values in many micro markets. Among the best performing micro markets are CBD, Outer Ring Road (ORR), Whitefield and Sarjapur Road. The availability of larger parcels of land around the ORR has facilitated large scale developments of commercial properties.
Many infrastructure initiatives such as Namma Metro, Peripheral Ring Road and Aerotropolis have provided a great impetus for CRE growth in the Bengaluru. The inclusion of Bengaluru in the Smart City list also bodes well as it will lead to improved infrastructure in the city. With a smarter infrastructure and technology-driven solutions, more investors and office occupiers will be attracted to the city.