Bengaluru Leads APAC Region With QoQ Rental Growth Of 5.8%: Knight Frank

Knight Frank, in its recent edition of the Asia-Pacific Prime Office Rental Index for Q1 2022 noted that amongst all cities of the region, Bengaluru saw the highest growth in rental values in the first quarter at 5.8% in Q1 2022 as compared to the previous quarter. The APAC regional index registered an increase of 0.8% quarter-on-quarter (QoQ), rising by 0.3% in the preceding quarter, as most countries in the region are now opening up for global business leading to stability in economic activities. The overall index is up 0.2% year-on-year. Of the 23 cities tracked by Knight Frank's Asia-Pacific Prime Office Rental Index, 21 cities recorded stable or increasing rents in Q1 2022, as compared to 13 in the previous quarter.

Shishir Baijal, Chairman and Managing Director, Knight Frank India said, "The Indian office market scenario has started to improve since the removal of COVID related restrictions. More companies are recalling their staff to office. Further, with the IT/ ITeS sector hiring upwards of 20% new staff in the last 18 - 24 months, demand for office space is expected to rise further. Bengaluru and NCR have seen a rise in leasing activities in Q1 2022 with the cities recording transactions of 3.5 million square feet (msf) and 2.3 msf respectively. The rental outlook for Bengaluru is strong, indicating a possible increase in values in the coming year, based mostly on the expected rise in demand.

Bengaluru

According to the Knight Frank report, with an increase of 5.8%, Bengaluru was the best performing prime office market in the APAC region in terms of rental growth in the last quarter. According to APAC Prime Office Rental Index, the current occupancy cost for prime office in Bengaluru was stated to be US$ 26.7/sq ft/year. With the change in the COVID - 19 protocols, which are now leading more and more companies to call back their employees, there has been an uptick in transaction activities in the city. Adding to that, new completions have been deliberately kept low, keeping the values intact in the city. The city is expected to see an upward trend in its rental value over the next 12 months. Bengaluru currently has an office inventory of 17.5 mn sqm with a vacancy level of 12.6%.

Delhi-NCR

According to the Knight Franck, the prime office market of Delhi-NCR witnessed no change in rental values in Q1 2022 over the previous quarter, however recording an annual rental value growth of 1% in Q1 2022. According to APAC Prime Office Rental Index, the current occupancy cost for prime office space in Delhi-NCR was stated to be US$ 60.1/sq ft/year (INR 376/sq ft/month). The rental value is expected to remain stable over the next 12 months. Delhi-NCR currently has an office inventory of 16.3 mn sqm with a vacancy level of 14.7%.

Mumbai Metropolitan Region

According to the Knight Frank report, the prime office market of the MMR witnessed a de-growth of 1.9% in Q1 2022 on an annual comparison. The rental values remained stable over the previous quarter in Q1 2022. According to APAC Prime Office Rental Index, the current occupancy cost for prime office market of MMR was stated to be US$ 50.9/sq ft/year (318/sq ft/month). The rental value is expected to remain stable over the next 12 months. MMR currently has prime office inventory of 14.6 mn sqm with a vacancy level of 20.6%.