Rentals of commercial properties in the country are expected to continue their upward spike in most of the metros in the country. There has already been a healthy increase in rentals in the last few years and the trend is likely to continue in 2019.
New Delhi is expected to witness an increase of 6.5 percent in prime rentals in 2019, according to a report prepared by real estate consultancy Knight Frank. The Capital is also the fourth fastest growing office market internationally, according to the report.
The IT capital of India-Bengaluru is also expected to see a healthy growth in rentals in 2019. The rents are expected to rise by 6.6 percent in 2019 because of the supply of low grade commercial real estate in the prime markets of the city. The prime rentals in the city stood at Rs 125 per sq ft per month in 2018.
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The demand from the IT and ITeS sectors has been decent. The start-ups are also taking up more and more space. This, coupled with lack of quality supply of commercial real estate, is causing the rental to go up. New Delhi will also see constricted supply of commercial real estate in 2019 and will take the prime rental values of Rs 326 per sq ft per month higher in 2019.
Maximum City Mumbai is expected to see stable growth in rentals with 0.3 percent growth in 2019. However, the metro is expcted to see 11.5 percent growth in commercial real estate rentals till 20121. Similarly, Bengaluru and New Delhi are expected to see 13.2 and 10.1 percent growth respectively till 2021.
Vacancy Rates Of Commercial Property
Along with rise in rentals, there will be improvement in vacancy rates. Vacancy rate in New Delhi is likely to move to 15 percent in 2019 from 16.5 percent in 2018. Similarly, vacancy rate in Mumbai is expected to fall to 14 percent in 2019 from 19.8 percent in 2018. However, Bengaluru will see the vacancy rates stagnant at 3.2 percent.
Shift In Focus Of Investors
The report states that in 2019, there will be a slight shift in focus of commercial real estate investors as they take into account a more uncertain international economy coupled with rising cost of debt.
The advent of Real Estate Investment Trusts (REITs) in the Indian market will see some of the dynamics of commercial real estate earnings, rentals and investment change in 2019. There are a number of REITs lined up in 2019 in India. The first REITs to hit the India market is the one by Embassy Office Parks. The Embassy Office Parks is a joint entity of PE firm Blackstone Group and Bengaluru-based Embassy Group.
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