Prime business hubs see office rental growth

Prime central business districts (CBDs) in at least two out of three Indian metros have recorded steady rental growth, according to a new report by Knight Frank.

Knight Frank Asia-Pacific’s report titled Prime Office Rental Index — Q3 2017 showed that Delhi’s Connaught Place recorded a 2.1 per cent rise in prime office rentals between Q2 and Q3 — second highest only after Bangkok, which topped the index with a rental appreciation of 4.4 per cent in the same period.

"In fact, with sustained demand, no negative rental price changes have been reported in the capital city since the March-ending quarter of 2014," said Knight Frank.

The index that tracked 20 key international markets in Asia, recorded 0.6 per cent increase in the September-ending quarter over Q2 2017.  

Further, despite 200,000 square metres of new supply hitting Bengaluru’s CBD, the tech hub witnessed rental rise of 1.4 per cent. While rental values in Mumbai’s Bandra-Kurla Complex remained steady, vacancy levels dropped lower and limited new supply entered the market, it said. The 12-month forecast, however, shows an increase in office space rents for all three CBDs. 

Knight Frank said the favourable outlook assumes importance in the wake of implementation of the goods and services tax that raised government tax on commercial rents to 18 per cent from 15 per cent earlier. 

Dr. Samantak Das, chief economist and national director of research, Knight Frank India, said, “The prime office rentals are showing an upward trend. These markets are generally driven by non-IT sectors. The quality supply is limited and we do see the upward pressure on rentals in the coming 12-month period.”

Prime rents in Singapore increased for the first time since late 2014, even as vacancy rates continued to rise above 15 per cent courtesy huge supplies over the past 6 months. 

The report expects the rents in 16 cities to either remain steady or increase, up from 15 in the previous forecast.