Demand for Commercial real estate is pushing prime office rentals in major cities.

By Abhay Harish Shah, Realty Quarter

Commercial real estate demand, led by the interest of sustained occupants to expand businesses in India, is pushing up rentals of prime offices in major cities like Mumbai, New Delhi, and Bangalore.

Over the course of the first quarter of the year, office rentals rose by 17%, 5% and 1.4% respectively in Bangalore, Mumbai and Delhi. As data from Knight Frank revealed, the growth has made Connaught Place in New Delhi the fourth most expensive office market in the Asia Pacific region.

Connaught Place registered a gross effective $82.5 per sq metre monthly rent (Rs 330 per sq ft) that stacked up just behind Hong Kong, Tokyo and Singapore.

The Bandra-Kurla Complex (BKC) in Mumbai was the seventh-most expensive office location, offering effective monthly income of $75.1 per sq meter (Rs 300 per sq ft).

Shishir Baijal (CMD of Knight Frank) said, “In 2018, the demand for offices showed record growth with leasing at more than 47 million square feet (MSF), whereas the supply of new offices increased 13% during that time. Prime offices are already operating in very low vacancies, and the new transactions are slowing down. High demand trends have placed rising pressure on rentals, particularly in prime markets, which is expected to continue.”

For the first quarter of 2019, Knight Frank’s Asia-Pacific Prime Office Rental Index showed a decline of 0.4% in sequence rent growth but remained up 6.2% year-on-year basis. The sequential decline in the index was due to a continued escalation in global uncertainties, leading to reinforcement of trade tension between the US and China, Brexit and various major regional elections.