Top 10 office markets with highest rental growth in 2017: Colliers International

[ecis2016.org] Southern cities like Bengaluru, Chennai and Hyderabad, accounted for a significant share of the office markets that witnessed the highest rental growth in Q2 2017, according to a report by Colliers International

As the office demand continued to intensify in Q2 2017, an upward pressure on rental values was observed in a few micro-markets across India. A high rental growth was seen mostly in the southern cities like Bengaluru, Chennai and Hyderabad, where the year-on-year (y-o-y) change ranged between 8-17 per cent at some locations.

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In H1 2017, Bengaluru and Hyderabad, both, witnessed single digit vacancy levels hovering between 8-9 per cent, due to a dearth of quality Grade A stock, thus, leading to increased rental values in some micro-markets. In 2016, a few Pune micro-markets witnessed a y-o-y rental growth of up to 19 per cent. Although the supply woes continue across Pune micro-markets, rental values have stabilised in Q2 2017, after a considerable increase in 2016.

According to Colliers Research, the top 10 office micro-markets that witnessed the highest rental growth in 2017 are as follows:

Bengaluru – CBD

Bengaluru CBD micro-market has always been the first preference for BFSI and IT occupiers, primarily due to its connectivity and prime location. In spite of having limited availability of office spaces and supply, this micro-market witnessed 17 per cent y-o-y rental appreciation.

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Chennai – Off CBD

Chennai office CBD micro-markets, which are predominantly IT markets, observed 13 per cent y-o-y rental growth. Apart from IT and BFSI, consulting companies have their setup in Guindy, MRC Nagar and Saligramam. In Q2 2017, Chennai office CBD micro-markets accounted for 16 per cent of total absorption.

Gurugram – DLF Cyber City (IT)

DLF Cyber City is an iconic and landmark commercial hub in Gurugram and is the top preference for domestic and international occupiers. Due to superior infrastructure and quality office spaces, DLF Cyber City witnessed 12 per cent y-o-y rental growth. This micro-market holds nine per cent share of the total office space absorption in Q2 2017.

Pune – Hadapsar/Fursungi

Hadapsar market is emerging due to some notable projects, such as Magarpatta City and other projects that offer large floor spaces. This micro-market is predominantly an IT/ITeS market with residential localities in the nearby catchment area. Hadapsar observed 10.2 per cent y-o-y rental growth.

Pune – Kharadi

Kharadi is one of the fastest growing commercial micro-markets and is rising as an IT hub. In the past few years, Kharadi has seen good projects like EON IT Park, which is one of the largest IT parks in Pune. It will also witness significant amount of office spaces in the next three years. Rentals in this micro-market have increased 10.1 per cent y-o-y.

Bengaluru – EPIP/Whitefield

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The commercial micro-market in EPIP/Whitefield, has ample availability of large floor spaces and Grade A developments are attracting occupiers, to consolidate their operations in this region. This micro-market, in eastern Bengaluru, has witnessed rental growth of 10 per cent y-o-y.

Hyderabad – SBD

The SBD market in Hyderabad has prominent locations such as HITEC City, Madhapur, Gachibowli and financial districts. In Q2 2017, 89 per cent of the total leasing volume was concentrated in the SBDs, due to superior amenities and reasonable rentals, compared to other cities. Rents in the SBD grew by 10 per cent y-o-y.

Bengaluru – Electronic City

This is one of the preferred micro-markets in Bengaluru, with comparatively cheaper rents than other markets of the city and offers large floor spaces and superior quality office spaces. Rentals here grew by an average of nine per cent y-o-y.

Chennai – OMR Post Toll

Increasing popularity of the OMR Post Toll micro-market has shifted occupiers’ focus to this market. It witnessed gross leasing of 33 per cent of total absorption in Q2 2017. This micro-market includes locations like Navalur, Sholinganallur and Pallavaram-Thoraipakkam Road, which is popularly known as the IT corridor of Chennai and has observed eight per cent y-o-y rental growth.

Bengaluru – Hosur Road

Hosur Road is an emerging IT/ITeS micro-market in Bengaluru with cheaper rates, mainly due to its location. This micro-market is located in the peripheral area of the city and has the potential for large projects, due to ample land availability. Hosur Road witnessed eight per cent y-o-y average rental growth.

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