Bengaluru, Mumbai CBDs to see rise in office rentals on resurgent IT demand: Knight Frank

Office market in India is expected to be robust despite sluggish economic growth with international property consultant Knight Frank projecting an increase in office rentals at central business districts (CBDs) of Bengaluru and Mumbai in 2020.

At the same time, rental growth at the CBD in National Capital Region (NCR) is expected to remain stable, said the recent report titled Asia Pacific Outlook Report 2020.

The CBD of Bengaluru comprising areas such as MG Road, Infantry Road and Residency Road is likely to see more supply coming in 2020 while the demand is expected to remain steady as the IT sector continues to expand.

Grade-A office rents across the Asia Pacific region are expected to fall between zero to three per cent in the coming year, down from 0.6 per cent rise in the first nine months of 2019, as occupier demand continues to soften.

Australia continues to provide investors with attractive investment propositions, given its higher yields relative to other developed markets.

In 2020, Australian commercial and industrial real estate is expected to see another year of double-digit total returns with capital growth accelerating in response to lower interest rates.

The CBD of Bengaluru was the best performing market in Asia Pacific in Q3 2019 with rental growth of 17.6 per cent, according to Knight Frank Asia Pacific Prime Office Rental Index Q3 2019.

The CBDs of Connaught Place in NCR and Bandra Kurla Complex (BKC) in Mumbai were the 7th and 11th fastest growing prime office markets in Asia Pacific region respectively with a comparatively modest 4.4 per cent and 2 per cent year-on-year rental growth in Q3 2019.

"Office markets in cities like Mumbai, NCR and Bengaluru continue to enjoy healthy rental growth despite the weaker economic sentiment in 2019, mainly due to the rapid expansion witnessed in its IT industry," said Shishir Baijal, Chairman and Managing Director of Knight Frank India.

"Multinationals continued to expand robustly especially in Bengaluru because of availability of the right talent pool and new office assets at comparatively low rents. We expect the trend to continue for these markets as the demand for office space is expected to grow in 2020 as well," he said.

In the latest survey 'Knight Frank-FICCI-NAREDCO Real Estate Sentiment Index Q3 2019,' about 82 per cent of the real estate stakeholders have expressed an optimistic outlook for the office sector, backed largely by a robust office supply pipeline for the next six months.

Real estate stakeholders also expect the rentals for Grade-A office spaces to inch up in the next six months.