Rentals in these 10 micro markets rose 7-16.3% in Q4 2018

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Micro markets in Bengaluru, Hyderabad, Chennai and Kolkata made it to the list of the top 10 micro markets, which witnessed maximum year-on-year rental increase in the 7.1-16.3 percent range in the fourth quarter of 2018, as per Colliers Research.

Bengaluru’s EPIP Zone/Whitefield saw a rental increase of 16.3 percent as a number of occupiers expanded, leading to strengthening of rentals. Availability of large floor plates and Grade A developments have been instrumental in attracting occupiers to consolidate operations, it said.

The Namma metro project is expected to start operations by 2022 and aligning with this timeline is a robust supply pipeline of 9.8 million sq ft, which is the second highest in Bengaluru. It expects this micro market to see rents rise 8.3 percent compounded annually over 2018-21.

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The central business district (CBD) in Hyderabad saw rentals increase 15.8 percent due higher demand for Grade A office space.

Hyderabad witnessed heightened leasing activity by IT-ITeS occupiers, resulting in a gross absorption of 6.8 million sq ft in 2018, around 18 percent higher than last year. Occupier demand will remain strong, supported by upcoming supply over the next three years, which will push average city rents by 2.3 percent over 2018-21, the report said.

Bannerghatta Road in Bengaluru witnessed a rental increase of 13.8 percent, with rents equating to Rs 70-95 per sq ft per month at the end of December. This is predominantly attributed to low vacancy levels and no visibility on upcoming supply.

The CBD in Kolkata witnessed a YoY rental increase of 10.5 percent as banks bought office space in this micro market.

OMR Post Toll in Chennai saw rentals rise by around 10 percent. Rajiv Gandhi Salai (OMR), the designated IT corridor of Chennai, has being witnessing significant demand in the pre-toll OMR corridor. This has resulted in a significant escalation in quoted rents and limited vacancy, the report added.

The Peripheral Business District micro market comprising Pocharam, Uppaland and Shamshabad in Hyderabad is catering to occupiers looking for new Grade A facilities and IT parks. Low supply and high demand led to rents rising 9.1 percent.

The secondary business district (SBD) in Hyderabad continued to be the most preferred micro market in Q4, accounting for 91 percent of total office leasing the city. The SBD recorded a rental increase of 8.3 percent. Vacancy levels as low as 4 percent pushed rentals higher in this strategically located micro market comprising Hitec city, Madhapur, Financial District Raidurg and its surroundings.

Rentals in Hosur Road, Bengaluru rose 8.1 percent in Q4. This is an emerging IT/ITeS micro market, with competitive rental rates owing to its strategic location. A limited supply pipeline of 0.8 million sq ft during 2019-21 is expected to further inflate rentals.

Bengaluru’s Electronic City saw rents increase 7.5 percent. It is one of the preferred micro markets in Bengaluru, offering large floor plates and premium quality office space.

The same in Outer Ring Road (KR Puram – Hebbal), Bengaluru rose 7.1 percent in Q4. The most active office destination in Bengaluru, Outer Ring Road (ORR) noted the maximum volume of absorption (44 percent), the report noted.India witnessed a gross leasing activity amounting to 50 million sq ft in 2018 across major seven cities, highest in past eight years, driven by buoyant leasing in Bengaluru and Delhi-NCR. Compared to 2017, gross leasing increased 17 percent as occupiers continued to expand and consolidate. However, new completions in 2018 declined 20 percent due to delay in construction, which resulted in the deferment of new supply to later quarters, the report stated.