Despite demonetisation, Bengaluru, New Delhi & Mumbai record healthy growth in office rental in Q1: Knight Frank

The rise in rents was remarkable considering that the three cities collectively saw close to 2.4 million square metre of new office space added since the March ending quarter of 2016, it said. Representational Image. Image Source: Pixabay

Highlights:
1. CBD area of Bengaluru registered 4.7% growth in the office rental space in Q1 of 2017

2. Connaught Place area of New Delhi recorded 4.3% growth in office rental in Q1

3. BKC area of Mumbai recorded 3.4% growth in Q1 of 2017

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The prime office markets in Bengaluru, New Delhi and Mumbai have recorded healthy growth in the office rentals space in the first quarter (Q1) of 2017 despite the nervousness of demonetisation among real estate investors, according to Knight Frank's latest report.

"Despite the initial jitters of demonetisation the key office markets in Delhi, Mumbai and India’s IT capital (Bengaluru) saw healthy surge in office rentals on a year-on-year (y-o-y) basis," Knight Frank said in a press release on Tuesday.

In a surprise move to curb black money, corruption and terrorism, prime minister Narendra Modi had announced demonetisation of high value notes of Rs 500 and Rs 1,000 on November 8 last year whereby it resulted in massive cash crunch across the country.

Property consultant Knight Frank in its recent report titled 'Knight Frank Asia-Pacific Prime Office Rental Index' has surveyed rent hikes at prime office markets across 20 global cities between the first quarter (Q1) of 2016 and 2017.

As per the Knight Frank report, Bengaluru has emerged as the top Indian metro for recording growth in the office rental space globally for the first quarter (Q1) of 2017.

The demand in the office market in top three Indian metros was driven by BFSI, manufacturing and consulting sectors. The central business district (CBD) of Bengaluru registered 4.7% growth in the office rental space in Q1 while Connaught Place in New Delhi recorded 4.3% growth in the office rental in the same period.

The growth in CBD of Bengaluru was also led by the growth in office rental space at MG Road area.

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Similarly, the Bandra Kurla Complex (BKC) area of Mumbai recorded 3.4% growth in the first quarter (Q1) of 2017, cited Knight Frank report.

Commenting on the rise in office rental space, Knight Frank India chief economist and national director Dr Samantak Das said, “There are disruptions in IT-driven office markets owing to geopolitical changes, automation and industry dynamics. But prime office markets in India appear as bright spots courtesy the inward-looking orientation of the industries driving them."

"Unlike IT-driven office markets which are linked to global fortunes, the prime office markets in India are driven by the Banking, Financial Services and Insurance (BFSI), manufacturing and consulting sectors," Das added.

The report further said that the rise in domestic consumption and fiscal reforms are expected to increase business confidence of investors into the country's office space.

"In India, as the impact of demonetisation gradually subsides, stronger domestic consumption and fiscal reforms are expected to improve business confidence," cited Knight Frank Asia-Pacific Prime Office Rental Index report.

Globally, the index grew 1.0% quarter-on-quarter courtesy rising rents in 10 of the markets in the March 2017 ending quarter.

According to the report, Bangkok topped the chart with a staggering year-on-year rental growth of 9.6% the index shows adding that rents in the Thai capital have been on the rise for more than two years and are expected to persist due to strong absorption amidst tight supply

The central business district (CBD) of Guangzhou in China recorded 3.0% growth in the office rental during the first quarter (Q1) of 2017 while the Puxi, Pudong area of Shanghai registered 2.1% growth in the office rental in the same period.

Besides, all the four major cities tracked across Australia saw prime rents increase in the first quarter (Q1) of 2017 with Melbourne and Sydney recording (8.4%) and (8.2%) rental growths year-on-year, respectively

At least six key cities including Singapore (-8.7%), Tokyo (-1.8%), Beijing (-1.3%) and Jakarta (-11.8%) witnessed negative growth, the report said.

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