Bengaluru May See A Rise In Office Rentals, Mumbai, NCR To Be Stable

Knight Frank, a leading international property consultancy, in its latest report Asia-Pacific Real Estate Outlook 2021: Navigating the Post-Pandemic Recovery - observes that India's office market will remain resilient in the new year of 2021.

According to the report, Bengaluru market is expected to experience a rise in rental values in the next year while Mumbai and NCR are expected to remain stable in rental values. These trends indicate that despite a bleak period between April - June 2020, overall demand for office space could remain strong in the new year.

"For the main office markets of India, the positive trends are a draw out of the encouragement received in the subsequent part of 2020 (July - Sept) which saw office space demand making a comeback, albeit still short of pre-COVID periods. Bengaluru, in particular, has the benefit of existing low vacancies that will enable absorption of much of the upcoming supply. The city also has the advantage of relatively lower rentals compared to global markets and large talent pool that should help in quicker revival of this market as global economies move towards normalcy. According to the report, Asia- Pacific prime office rents are expected to decline between -3% to 0% in 2021," a release states.

Warehousing

According to the Knight Frank report, the demand for warehousing remained relatively resilient this year, correcting only by 11% Y-O-Y, as compared to the 44% CAGR recorded from FY17 to FY20.

"Despite the ongoing pandemic, the Indian warehousing sector is expected to remain comparatively less impacted due to rising e-commerce demand which is expected to grow from US$70 billion in FY19 to an estimated US$160 billion by 2022. With such a strong demand driver, India will be a region that data centre investors, occupiers, and solution providers will find hard to ignore, which will in turn further boost demand for the prime industrial sector. With an increase in demand from e-commerce, India's online retail growth is estimated at 13% Y-o-Y in 2020. In October 2020, the asking industrial rents for Mumbai, Delhi, and Bengaluru warehousing remained stable and are expected to remain unchanged for the year 2021," the Knight Franck report has stated.

In terms of APAC Capital market forecast, the commercial yields for Mumbai, NCR, and Bengaluru under office and warehousing segment are expected to remain stable in 2021. In the APAC region industrial investment share of commercial transaction volumes increased by 50% in 2020 and is expected to continue do well in 2021 as investors continue to jump on the e-commerce growth.