Knight Frank, in its recent edition of the Asia-Pacific Prime Office Rental Index for Q1 2022 noted that amongst all cities of the region, Bengaluru saw the highest growth in rental values in the first quarter at 5.8 per cent in Q1 2022 as compared to the previous quarter.
The APAC regional index registered an increase of 0.8 per cent quarter-on-quarter (QoQ), rising by 0.3 per cent in the preceding quarter, as most countries in the region are now opening up for global business leading to stability in economic activities. The overall index is up 0.2 per cent year-on-year.
Of the 23 cities tracked by Knight Frank’s Asia-Pacific Prime Office Rental Index, 21 cities recorded stable or increasing rents in Q1 2022, as compared to 13 in the previous quarter.
Hong- Kong SAR continued to be Asia’s most expensive office market with a cost at US$ 186/sq ft/year.
Delhi-NCR was the 9th most expensive market at US$ 60/sq ft/year (Rs 376/sq ft/month).
While Mumbai at US$ 50.9/sq ft/year Rs318/sq ft/month) and Bengaluru at US$ 26.7/sq ft/year Rs167/sq ft/month) held positions of 15th and 21st positions in terms of most expensive office locations respectively.
This is despite a turbulent Q1 with accelerating inflation and the Russian invasion of Ukraine weighing down on market sentiment. Vacancy rate, declined for the second consecutive quarter, is at 13.1 per cent in Q1 2022 for the APAC region. This should start to reduce further as more Asia-Pacific markets start to open their economies and employees steadily return to work in the CBDs.
With an increase of 5.8 per cent, Bengaluru was the best performing prime office market in the APAC region in terms of rental growth in the last quarter. According to APAC Prime Office Rental Index, the current occupancy cost for prime office in Bengaluru was stated to be US$ 26.7/sq ft/year.
With the change in the COVID – 19 protocols, which are now leading more and more companies to call back their employees, there has been an uptick in transaction activities in the city. Adding to that, new completions have been deliberately kept low, keeping the values intact in the city. The city is expected to see an upward trend in its rental value over the next 12 months. Bengaluru currently has an office inventory of 17.5 mn sqm with a vacancy level of 12.6 per cent.
The prime office market of Delhi-NCR witnessed no change in rental values in Q1 2022 over the previous quarter, however recording an annual rental value growth of 1 per cent in Q1 2022. According to APAC Prime Office Rental Index, the current occupancy cost for prime office space in Delhi-NCR was stated to be US$ 60.1/sq ft/year (Rs 376/sq ft/month). The rental value is expected to remain stable over the next 12 months. Delhi-NCR currently has an office inventory of 16.3 mn sqm with a vacancy level of 14.7 per cent.
Mumbai Metropolitan Region (MMR)
The prime office market of the MMR witnessed a de-growth of 1.9 per cent in Q1 2022 on an annual comparison. The rental values remained stable over the previous quarter in Q1 2022. According to APAC Prime Office Rental Index, the current occupancy cost for prime office market of MMR was stated to be US$ 50.9/sq ft/year (318/sq ft/month). The rental value is expected to remain stable over the next 12 months. MMR currently has prime office inventory of 14.6 mn sqm with a vacancy level of 20.6 per cent.