Global Cities - 2016 report from Knight Frank reveal that current office rentals in Mumbai and Delhi are lower than the 2007 peak levels by 17 and 19 per cent respectively; Bengaluru holds forte with an 8 per cent growth.
Knight Frank, one of the leading independent global property consultancies, recently launched the second edition of its flagship global report - Global Cities - 2016. The report provides a comprehensive outlook for real estate in 21 of the leading business cities and forecasts for the next five years. This time around Bengaluru and Delhi are also a part of the analysis apart from Mumbai which was included last year.
Some of the key findings of the report include: In comparison with London and New York that offer rental yields at 4 per cent, Bengaluru, Mumbai and Delhi lead the pack with 10.5, 10 and 9 per cent respectively (refer to table no.1). Current office rentals in Mumbai and Delhi are lower than the 2007 peak levels by 17 and 19 per cent respectively; Bengaluru holds forte with an 8 per cent growth.
Mumbai and Bengaluru feature among the list of top five global cites in terms of future rental growth - expected to grow to the tune of nearly 22 and 16 per cent respectively. The Delhi-Mumbai Industrial Corridor (DMIC) finds a place among the top 5 global infrastructure projects - expected to create new business clusters and generate unprecedented employment opportunities
While London and San Francisco witnessed the highest rental growth for high-rise offices (skyscrapers), Mumbai has also shown a healthy traction in high-rise rentals. The Indian REIT sector to give a further push to commercial real estate; could attract investments worth $100 billion in the next few years. About 67 per cent of investments into Indian real estate coming in from overseas investors - highest all among other nations.
Talking about the findings, Shishir Baijal, Chairman & Managing Director, Knight Frank India, said, ´Indian office market has been maintaining the healthy traction of 2014 and has clocked office space transactions of 18 million sq.ft. in the first six months of 2015 and we expect the year to complete at around 40 million sq ft which is the highest since 2011. This is a record year for Bengaluru, which is expected to transact office space to the tune of over 11 million sq.ft. in 2015. Even though at an aggregate level, the vacancy is at 17 per cent the challenge is to get good quality office spaces across prime business districts, wherein vacancy is in single digits. Due to a robust demand from start-ups and e-commerce, other than IT/ITeS, BFSI and manufacturing, office rentals are experiencing a substantial surge. Going forward, we foresee demand to continue outstripping supply.´
Also added, Dr Samantak Das, Chief Economist & National Director of Research, Knight Frank India, said, ´While Bengaluru, Mumbai and Delhi are offering the highest yields globally of 9-11 per cent , we see a lot of interest from the investor´s fraternity in the last one year which was preceded by a period of prolonged slowdown. Office markets across the top cities of India are continuing with its turnaround trend observed in 2014. This is backed by robust economic growth and focus on infrastructure & ease of doing business. However, rentals across Mumbai and Delhi are still below the 2007 peak levels, though Bengaluru is an outlier wherein rentals are 8 per cent more. Currently these cities are facing an acute shortage of good quality office space on the face of robust demand which is creating an upward pressure on office rentals that is expected to scale up in the range of 6- 7 per cent in the next six months YoY.´
In India, Knight Frank is headquartered in Mumbai and has more than 1,000 experts across Bengaluru, Delhi, Pune, Hyderabad, Chennai, Kolkata and Ahmedabad. Backed by strong research and analytics, Knight Frank´s experts work with clients to offer a comprehensive range of real estate services across advisory, valuation and consulting; transactions (residential, commercial, retail, hospitality, land, capitals); facilities management; and project management.