Office space rental yields in CBD range 8-10%

The gross rental yields in commercial office space in central business district (CBD) locations in the country continue to be in the range of 8-10 per cent. However, the peripheral and suburban areas have witnessed a higher yield, ranging from 10-12 per cent.

International property consultants Cushman & Wakefield in its Asia Pacific Investment report - 2008 said the rate of rental growth in the CBD areas across the major cities slowed down marginally to 11 per cent in the first quarter (Q1) of 2008 from 14 per cent in the corresponding period last year.

“The slowdown is being attributed to the infusion of new commercial stock with better infrastructure in the suburban and peripheral locations, resulting in companies moving towards these locations to enjoy better and more cost-effective facilities,” the report added. The projected supply across seven major cities for the current year is estimated at 83 million square feet.

Also the share of the special economic zones (SEZ) space to the market amounts to 24 million square feet. Office space demand in the first quarter of 2008 was recorded around 14.48 million square feet compared to 9.41 million square feet in the same quarter of 2007.

As for as the industrial property market is concerned, the suburbs in some of the major cities are undergoing a transformation as several manufacturing and warehousing units are being established there. The rental values prevalent last year continue to remain the same.

As India emerges as the preferred destination for manufacturing outsourcing, many Indian states are luring industrialists by offering incentives for their investments and improving the infrastructure. Industrial zones have been identified by several states for large manufacturing units, as well as small sheds within the industrial parks.

“The rental yield for manufacturing and warehousing space in industrial locations across the country was in the range of 10-12 per cent in the first quarter of 2008. This rate is likely to continue in the medium term, expecting a similar growth momentum for the segment,” the report said.