Bangalore Office Market Update
Published on Mar 05, 2013, 09:20 PM IST
The SBD (Secondary Business District) accounts for the bulk of total absorption
• Rents remain unchanged from the previous quarter
• Capital values increase marginally across all submarkets
The Bangalore office market saw healthy leasing activity in 4Q12, with a total transaction volume of 1.9 million sq ft against 670,900 sq ft in 3Q12. Net absorption in 4Q12 was 1.4 million sq ft in 4Q12 against 1.2 million sq ft in 3Q12.
The combination of stable demand and restricted supply was instrumental in lowering the city’s overall vacancy rate to 7.2% in 4Q12 from 7.4% in 3Q12.
The IT/ITES sector accounted for the majority of leasing activity in the quarter. Major companies leasing space in the quarter included Britannia, SLK Software, Sabre Technologies, Deutsche Bank, Accenture, Wipro, Bosch, Computer Slash Support, SAP Labs, Empire Software, Cypress and Ameriprise.
Bangalore saw the completion of four projects with a total built-up area of 1.3 million sq ft in 4Q12 against 1.1 million sq ft in 3Q12. Completions in the CBD in 4Q12 included Khoday Tower (200,000 sq ft) along Rajbhavan Road and JP Square (30,500 sq ft) in Sadashivnagar. In the SBD, Prestige Exora Block B3 and Embassy Tech Square Block Delta were completed.
In 4Q12, average rents for office space remained unchanged across all submarkets of the city. In the CBD rents were INR 83 per sq ft per month while in the SBD rents were INR 49 per sq ft per month. Rents in Whitefield and Electronic City were INR 33 and INR 26 per sq ft per month, respectively.
Capital values increased marginally across all submarkets in 4Q12, with the CBD and SBD increasing by only 1.0% q-o-q. In Whitefield and Electronic City, capital value growth was stronger at 2.0% q-o-q due to rising demand.
Investment markets remained quiet in Bangalore with no sales transactions recorded in the quarter.
Market sentiment seems to have stabilised and given existing enquiry levels and demand, 2013 is likely to see modest leasing activity, especially in the Whitefield and Secondary submarkets.
Rents are expected to be relatively stable in the first half of 2013 across all submarkets, before seeing a marginal rise in the second half of the year. This is due to limited supply, stable demand and increased interest from IT occupiers for office space in SBD and Whitefield submarkets.
Source: Jones Lang LaSalle India
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