Homes and gardens

Rise in office rental growth

Three Indian metros led by Bengaluru were among select global cities that saw sharp appreciation in office rents, according to the Knight Frank Asia-Pacific Prime Office Rental Index. The index compared rent hikes at prime office markets across 20 global cities between the first quarter of 2016 and this year.

Despite the initial jitters of demonetisation the key office markets in Delhi, Mumbai and India’s IT capital saw a healthy surge in office rentals on a y-o-y basis. While Bengaluru recorded 4.7%, established central business districts such as Connaught Place in Delhi (4.3%) and Bandra-Kurla Complex in Mumbai (3.4%) saw robust rental growths.

The rise in rents was remarkable considering that the three cities collectively saw close to 2.4 million sq. m of new office space added since the March ending quarter of 2016, the index says.

Samantak Das, Chief Economist & National Director-Research, Knight Frank India, said, “There are disruptions in IT-driven office markets owing to geopolitical changes, automation and industry dynamics. But prime office markets in India appear as bright spots courtesy the inward-looking orientation of the industries driving them. Unlike IT-driven office markets which are linked to global fortunes, the prime office markets in India are driven by the Banking, Financial Services and Insurance (BFSI), manufacturing and consulting sectors.”

Key findings

· Sectors such as financial services, manufacturing and technology are further expected to push leasing demand in the near future.

· Globally the index grew 1% quarter-on-quarter courtesy rising rents in 10 of the markets in the March 2017 ending quarter.

· Bangkok topped the chart with a staggering year-on-year rental growth of 9.6%, the index shows, adding that rents in the Thai capital have been on the rise for more than two years and are expected to persist due to strong absorption amidst tight supply.

· Meanwhile all the four major cities tracked across Australia saw prime rents increase in the first quarter of 2017 with Melbourne and Sydney recording 8.4% and 8.2% rental growths year-on-year respectively.

· At least six key cities including Singapore (-8.7%), Tokyo (-1.8%), Beijing (-1.3%) and Jakarta (-11.8%) witnessed negative growth.

· Despite global quandaries such as the U.S. political uncertainty, rising interest rates and Chinese capital controls, the International Monetary Fund has projected global economic activity to gain momentum with 3.5% growth expected this year over 3.1% increase in 2016.

With a moderate rise in commodity prices and improving market sentiment, these positive elements bode well for several Asia-Pacific prime office markets for the rest of the year.

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Printable version | Jun 12, 2021 7:33:46 AM |

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