* The city registers a rental growth of 11% YoY; highest across the top eight markets of India
* Sales of units above INR 10 mn increased significantly
* The quarters-to-sell (QTS) declined to historical low of 5 quarters
In Knight Frank India’s latest report, India Real Estate – Residential and Commercial (July – December 2022), it is noted that Bengaluru remained the top performer in office leasing, registering 14.5 mn sq ft of office leasing volume, a 19% annual growth in the year 2022. The city accounts for 28% of the total office transactions across the top eight markets in India.
Bengaluru’s residential market recorded housing sales of 53,363 units, a significant 40% YoY growth in the calendar year (CY) 2022. New launches also saw a substantial rise of 42% YoY with the addition of 43,420 units in 2022. The weighted average price for the region grew by 7% YoY, highest amongst the top eight markets of India. The strong sales momentum also helped in the decline of quarters to sell (QTS) to 5 quarters, which is a historical low for the city.
Shantanu Mazumder, Executive Director – Bengaluru, Knight Frank India said, “Bengaluru’s residential segment remained vibrant, enduring multiple headwinds arising from the Omicron wave in the early months of the year, followed by a steep rise in raw material cost, consumer inflation and a rapid rise in home loan rates. The resurgence of the city’s residential market translated to a strong price rise too in the year 2022.”
Commenting on the office segment, Shantanu Mazumder said “Bengaluru remained the top office market recording the second-best leasing volumes in the last decade, despite challenges like continuation of work from home and hybrid models amongst the largest occupier sector – IT/ ITeS. Strong start up ecosystem and expansion of new age companies like e-commerce and EdTech and fin-tech kept demand buoyant. However, the second half of the year saw leasing pace reduce due to economic uncertainties in global markets, especially in the USA. This trend may last for a couple of more quarters post which the leasing momentum will regain its pace.”
Knight Frank India today launched the 18th edition of its flagship half-yearly report - India Real Estate: 2022 – which presents a comprehensive analysis of the residential and office market performance across eight major cities for July-December 2022 (H2 2022) period.
RESIDENTIAL MARKET HIGHLIGHTS OF BENGALURU
Buyer sentiment remained strong into the second half of the year despite a sharp rise in interest rates. Bengaluru’s residential market recorded sale of 26,686 units in H2 2022 registering a 15% growth in a year, while residential launches of 22,197 units was recorded in the same period. Although the launches grew significantly by 29% YoY during this six-monthly period, when measured sequentially (H2 2022 compared to H1 2022), the second half grew momentum of sales and launches in the city.
The average weighted average price of residential units in Bengaluru has increased by 7% YoY to INR 5,511 per sq ft in H2 2022 attributed to strong demand trends along with a rise in the cost of construction.
RESIDENTIAL MICRO MARKET WISE ASSESSMENT
South Bengaluru remained the most popular micro-market garnering a share of 46% of the residential sales in the city during H2 2022. Housing demand in this cluster remained steady due to the proximity of prominent tech parks and employment clusters located at Electronic City and Outer Ring Road (ORR). East Bengaluru was another sought-after region for residential demand in Bengaluru. The demand, which was primarily concentrated in Whitefield, K R Puram, etc. gradually expanded to peripheral areas of micro-markets such as Hoskote.
BENGALURU TICKET SIZE SPLIT COMPARISON OF SALES DURING H2 2021 AND H2 2022
Sale of high end units costing more than INR 10 mn strengthened significantly and grew to be 28% in 2022 from mere 14% in 2018. The growth in the high paying information technology sector and consistent expansion of start-ups and unicorns in the city boosted the earnings of the population in Bengaluru leading to this rise.
OFFICE MARKET HIGHLIGHTS OF BENGALURU (H2 2022)
Office volumes in Bengaluru moderated during H2 2022. The precautionary stance of occupiers due to headwinds arising from economic uncertainties has impacted the office space leasing with Bengaluru registering 6.8 mn sq ft of leasing recording a 22% YoY decline in H2 2022. However, new supply of office space remained robust with the city recording a rise of 45% YoY with an addition of 9.8 mn sq ft in H2 2022.
The prominent Information Technology (IT) sector, a strong start-up ecosystem, and the expansion of new age companies in sectors like e-commerce, fin-tech and ed-tech has buoyed the demand for office leasing in the city. Supply infusion of office space in in 2022 was recorded at 15.6 mn sq ft, higher by 31% over the preceding year.
Healthy demand for occupancy during the year has led to a spike in rent in the city. The average transacted rentals for Bengaluru surged by 11% YoY to INR 81/sq ft/month in 2022.
Co-working sector recorded maximum leasing volume accounting for 27% of all the transactions in the city during H2 2022. Other services sector, Manufacturing and BFSI sector too witnessed an acceleration in the leasing volumes in H2 2022. Other services sector which comprises of education, healthcare, consulting etc. recorded an increase in total share from 15% in H2 2021 to 22% in H2 2022. Manufacturing and BFSI sectors too grew substantially from 11% in H2 2022 to 17% in H2 2022 and 5% in H2 2021 to 11% in H2 2022 respectively. However, due to apprehension on tech sector due to economic headwinds in key client markets such as the US and UK, the leasing momentum from the IT sector moderated from 46% in H2 2021 to 23% in H2 2022.
BUSINESS DISTRICT WISE TRANSACTIONS SPLIT IN H2 2021 AND H2 2022
Outer Ring Road (ORR) dominated with 38% of the total office space leasing volume during H2 2022. ORR continues to be an attractive micro-market as the location includes many established business parks set up by Grade A developers with quality space and convenience provided for the occupiers. Peripheral Business District (PBD) East registers the second largest share of 33% of total office space leasing volume. From a mere 10% leasing share in 2017, the demand for office space in this region has significantly increased in the last 5 years. Development of infrastructure has impacted both leasing and addition of new office spaces in PBD East.
Source: Knight Frank Research
The average transacted rentals for Bengaluru surged by 11% YoY to INR 81/sq ft/month in 2022. PBD East and PBD North were the two key markets which witnessed a sharp rise in rents. The demand for office space in PBD North has picked up significantly in the last few years with increased deals in Yelahanka and Thanisandra.