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Bengaluru to lead office market demand in India in 2022: Savills India report

Savills

February 16, 2022: Bengaluru with an estimated gross absorption of 13 mn sq.ft. in 2022, is expected to continue leading office space leasing activity across the top six cities of the country.

Developers are also expected to infuse around 18 mn sq.ft. of supply in the market during 2022 taking the Grade-A stock of commercial office space in the city beyond 200 mn sq. ft. according to real estate advisory firm Savills India.

StockAbsorptionSupply
20212022F20212022F20212022F
 183.7 mn sq. ft.201.7 mn sq.ft.12 mn sq.ft.13 mn sq.ft.15.2 mn sq. ft.18 mn sq. ft.

Office Market Outlook:

  • Absorption: 13 mn sq.ft. projected. Estimated growth of around 8% from 2021
  • Supply: 18 mn sq.ft. projected to be infused in the city. East Bangalore (ORR & Brookfield, Whitefield) to contribute to over 60% of this projected supply
  • Demand Drivers : IT, Engineering & manufacturing, Flex Space and BFSI are likely to remain the most prominent demand generators in 2022
  • Flex Space Solutions: Flex space solutions could witness strong activity via high demand given the fact that the segment is best suited to serve occupiers with dynamic space requirements
  • Vacancy: Given the expectations of supply outpacing demand in 2022, vacancy levels could increase further and reach 19-20% by the end of next year. Quality spaces, however will continue to see low vacancy across key micro-markets
  • Rent: Average city rentals are expected to remain stable. However, high demand micro-markets may see minor increase in rental growth year on year.

Key Highlights of 2021 for Bengaluru office market

  • Bengaluru witnessed 12.0 mn sq. ft. in 2021, corresponding to almost one-third of the office space demand in the country. Leasing activity in 2021 witnessed a YOY growth of 5%.
  • The city market saw completions of about 15.2 mn sq. ft. in 2021, a significant 44% YOY growth
  • Outer Ring Road (ORR) and Peripheral East comprising Whitefield and Brookefield continued to witness highest traction and contributed to more than 60% of the leasing activity in 2021
  • The secondary business district also witnessed significant interest from occupiers; its share rising from 17% in 2020 to 25% in 2021
  • Whitefield in Eastern Bengaluru witnessed significant supply infusion, and had a share of 30% in 2021, as opposed to 17% in 2020. The northern peripheral area with its proximity to the international airport also registered a sizeable growth, 3.5 mn sq. ft. in 2021 as compared to 1.4 mn sq. ft. in 2020. The secondary business district meanwhile witnessed limited supply infusion of 0.25 mn sq. ft. in 2021
  • The IT sector continued to drive leasing activity and had a share of more than 60% in 2021
  • The coworking segment regained its footing buoyed by enterprise-level offerings, increasing its share in city-level demand from 10% in 2020 to 15% in 2021. Interestingly, around 78% of the demand was driven by Global Captive Clients (GCC), indicating the willingness of MNCs to set up and expand service capabilities in the city
  • Increasing space reassessments had driven the average citywide vacancy levels to 18% in 2021, a significant increase from 10% a year ago
  • Despite increased vacancy, average rentals in the city increased by 1% YOY in 2021. High grade buildings, in fact, witnessed 5-10% YOY appreciation in rental values
Sarita Hunt

Sarita Hunt, MD, Bengaluru, Savills India said,” Bengaluru has been an undisputed leader of office leasing in India for a while now and is expected to maintain the streak in 2022 as well. Riding on back of significant demand by IT sector, Bengaluru is set to have one of the largest stock of Grade A office space in the country. While the emergence of a third wave did create some amount of uncertainty, it could not fully dampen the spirits of the buyer/occupier community. Albeit on a flexible basis, many companies are expected to resume work from office during the course of this year and this change in scenario will definitely enhance the overall real estate recovery in the city.”

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