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Bengaluru, Mumbai CBDs expected to see rise in office rentals in 2020: Knight Frank

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Bengaluru CBD expected to see more supply coming in 2020, demand to stay steady.

Office market in India will continue to be robust despite sluggish economic growth, with international property consultant Knight Frank in its recent report – Asia-Pacific Outlook Report 2020 – projecting an increase in office rentals in the Central Business Districts (CBDs) of Bengaluru and Mumbai in 2020, while the rental growth in the CBD in National Capital Region (NCR) is expected to remain stable. 

The CBD of Bengaluru, comprising areas such as MG Road, Infantry Road and Residency Road, is expected to see more supply coming in 2020, while the demand is expected to remain steady as the IT sector continues to expand.

Grade-A office rents across the Asia-Pacific region are expected to fall between 0 and -3% in 2020, down from the 0.6% rise in the first nine months of 2019, as occupier demand continues to soften. 

Australia continues to provide investors with attractive investment propositions, given its higher yields relative to other developed markets. In 2020, Australian commercial and industrial real estate is expected to see another year of double-digit total returns, with capital growth accelerating in response to lower interest rates.

The CBD of Bengaluru was the best performing market in Asia Pacific in Q3 2019, with a rental growth of 17.6%, according to Knight Frank Asia-Pacific Prime Office Rental Index Q3 2019.The CBDs of Connaught Place in National Capital Region (NCR) and Bandra Kurla Complex (BKC) in Mumbai were the 7th and 11th fastest-growing prime office markets in the Asia-Pacific region, respectively, with a comparatively modest 4.4% and 2% YoY rental growth in Q3 2019.

Asia-Pacific Prime Office Rent

(As of Q3 2019)

MarketsCityLocal Measurements^Prime Net 
Headline Rent
2019 % Change*VacancyForecast for 
next 12 months
IndiaBengaluruINR/sqft/annum 1,6158.0% 4.0% Increase 
IndiaMumbaiINR/sqft/annum 3,6401.1% 18.4% Increase 
IndiaNCRINR/sqft/annum 4,0794.4% 16.4% Same 
AustraliaBrisbane AUD/sq m/annum613.0 2.2% 9.6% Increase
AustraliaMelbourne AUD/sq m/annum694.0  8.8% 2.2% Increase
AustraliaPerthAUD/sq m/annum610.03.2%14.8%Increase
AustraliaSydneyAUD/sq m/annum 1,1654.9% 3.0% Increase 
East AsiaTokyoJPY/tsubo/month 39,6240.4% 0.6% Same 
East AsiaBeijingCNY/sq m/month 360-3.6% 10.1%Decrease 
East AsiaGuangzhouCNY/sq m/month 193.40.4% 8.0% Same 
East AsiaShanghaiCNY/sq m/month 282.9-4.1% 12.1% Decrease 
East AsiaHong KongHKD/sqft/month 150.5-8.1% 3.9% Decrease 
East AsiaTaipeiTWD/ping/month 2,7882.0% 5.5% Increase 
East AsiaSeoulKRW/sq m/month 33,816.60.1% 9.7% Same 
ASEANPhnom Penh USD/sq m/month 23.6  0.5% 12.4% Same 
ASEANJakarta IDR/sq m/annum 4,200,6240.0% 23.0% Same 
ASEANKuala Lumpur MYR/sqft/month 5.91.5% 22.5% Decrease 
ASEANSingapore SGD/sqft/month 10.351.9% 9.9% Increase 
ASEANBangkok THB/sq m/month 1,1294.7% 8.1% Same 
ASEANManilaPHP/sq m/month 1,0955.1%8.0%Decrease

Based on net floor areas except for China, India, Korea, Taiwan, and Thailand (gross) *January 1, 2019 to September 30, 2019 
Inclusive of incentives, service charges and taxes. Based on net floor areas. Source: Knight Frank Research

 “Office markets in cities like Mumbai, NCR and Bengaluru continue to enjoy healthy rental growth, despite the weaker economic sentiment in 2019, mainly due to the rapid expansion witnessed in its IT industry. Multinationals continued to expand robustly especially in Bengaluru because of availability of the right talent pool and new office assets at comparatively low rents. We expect the trend to continue for these markets as the demand for office space is expected to grow in 2020 as well,” said Shishir Baijal, Chairman and Managing Director of Knight Frank India.

In the latest survey – Knight Frank – FICCI – NAREDCO – ‘Real Estate Sentiment Index Q3 2019’,majority (82%) of the real estate stakeholders have expressed an optimistic outlook for office sector, backed largely by a robust office supply pipeline for the next six months. Real estate stakeholders also expect the rentals for Grade A office spaces to inch up in the next six months.

ALSO READ: USD 8.7 bn of MMR’s Realty Loans Severely Stressed, Double of NCR

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