Bengaluru Retained Top Slot for Highest Office Space Transaction During H1, 2016: Knight Frank

Bengaluru retained the top slot for the highest office space transactions in the country in the first half of 2016. The city clocked a total transaction space of 6.1 million square feet during the period of January to June 2016, almost matching the 6.1 million square feet of office space transacted during the corresponding period in 2015. The city attracted substantial interest among the IT and ITeS sectors, with big players like Google, Infosys, HP, TCS occupying large spaces, which resulted in H1 2016 emerging as the period with the highest transaction in four years, falling marginally short of the H1 2011 level.

Satish B N, Executive Director – South India, Knight Frank says, “The city witnessed the infusion of a whopping 6 million square feet of new office space, the highest in five years after the lag that hit the market recently, leading potential occupiers to turn to pre-leasing deals for large space requirements.”

“The new office completions took the total office stock to 128.5 million sq ft in H1 2016, while the occupied office stock recorded 119.4 million sq ft, making it the office market with the largest occupied stock in the country,” adds Satish.

Vacancy rates, which had been declining steadily over the years owing to consistent transactions and retained new competitions, continued to remain at 7 percent in H1 2016 despite the substantial number of new completions this year.

Office Takeaways:

·         H1 2016 witnessed a 12% growth in the transaction volume across the top six cities of India. Transactions increased from 17.9 mn sq ft in H1 2015 to 20 mn sq ft in the latest six-monthly period

·         Rental values have continued to maintain their upward movement in most of the cities, as the average rents shot up by 8% Y-o-Y in H1 2016. This jump was led by cities such as NCR, Pune and Bengaluru, where rents have moved up in the range of 10-14% Y-o-Y in H1 2016

·         In terms of new completions, H1 2016 has been an encouraging period, as more than 19 mn sq ft of space was delivered, compared to just 15.8 mn sq ft in the same period the previous year

·         Vacancy levels in the top six cities fell marginally, from 17% in H1 2015 to less than 15% in H1 2016

Speaking on the occasion, Shishir Baijal, Chairman and Managing Director, Knight Frank India said, “The real estate sector in India could be at its inflection point with sales in the top six residential markets showing a positive trend registering 7% growth in the first half of 2016. Factors like lower interest rates and a good monsoon will further boost the stakeholder sentiment. We had predicted a revival in market momentum in our FICCI – Knight Frank Sentiment Index of Q1 and the sentiments have gone up after six consecutive quarters. The reasons for these can be attributed to the time correction of prices in most markets, RERA becoming a reality, recent amendments to REITs and an overall positive regulatory environment to name a few.

The H1 2016 research shows that the unsold inventory levels have dropped by 7% Y-o-Y thus bringing in some cheer to developers. Although Mumbai, Bangalore and Ahmedabad have shown positive growth; NCR with its dismal performance still remains a concern.”   

He further added, “On the office front, H1 2016 witnessed a 12% growth in the transaction volume across the top six cities of India. The H1 has been an encouraging period, as more than 19mn sq. ft. of space was delivered, compared to just 15.8 mn sq. ft. in the same period in the previous year. Vacancy levels in top six cities fell marginally and rental values have continued to maintain their upward movement in most of the cities.

Over all the first six months have been on a positive track, except for residential in NCR and Chennai, but we will need to wait for the next two quarters to see whether the market is moving in the right direction.”