Connaught Place is the 4th most expensive office market in Asia Pacific: Survey

Knight Frank has launched its Asia–Pacific Prime Office Rental Index for Q1 2019 that tracks prime office rental movement across the key markets of Asia. The index recorded a decline of 0.4% quarter-on-quarter in Q1 2019, though it remains up by 6.2% year-on-year basis. The index decline was attributed to continued heightened global uncertainties led by US-China trade tension re-escalation, Brexit and various major elections across the region.

However, bucking the trend and despite the recently concluded elections, Indian cities like Bengaluru, Mumbai and the National Capital Region (NCR) see a promising growth with a stable to increase in the Prime Office Rental forecast. Indian office rents grew in Q1 with Bengaluru and Mumbai rising 17% and 5% year-on-year (YoY) respectively following a strong 2018 performance stemming from chronic undersupply in both markets, solid demand from IT/ITeS tenants in Bengaluru and new space take-up by occupiers in Mumbai, Delhi saw a 1.4% (YoY) rise in rents in the prime office market.

Key trends in the Asia Pacific office market in Q1 2019

Of the 20 Asian cities tracked by the index, 15 recorded either stable or increased rents; two less than the 17 reported in the previous quarter.

While prime office rents were mostly flat in Q1 with Bengaluru and Mumbai 17% and 5% year-on-year (YoY), respectively following a strong 2018 performance stemming from chronic undersupply in both markets, solid demand from IT/ITeS tenants in Bengaluru and new space take-up by occupiers in Mumbai.
New Delhi’s Connaught Place recorded gross effective rents of USD 82.5 /sq m/month which stacked up as the fourth most expensive office location in Asia Pacific behind Hong Kong, Tokyo and Singapore. Mumbai BKC with effective rents of USD 75.1 /sq m/ month was the seventh most expensive office location.
In terms of year-on-year growth, prime office rentals in Bengaluru and Mumbai grew positively by 17% and 6%, with gross effective rents in the markets standing at USD 31.2 and USD 75.1/sq m/month.
NCR prime office space denoted by Connaught Place saw a 1.4% quarter-on-quarter rise in rents. The office rental for the prime market currently stands at USD 82.5/sq m/month, making it the 4^th most expensive office market in Asia.

Prime office rentals are forecasted to increase in Bengaluru and Mumbai while NCR is set to maintain the current market tone. The office space demand witnessed record growth in 2018 with over 47 million square feet (msf) of leasing, while new office space supply rose by 13% in the same period. Prime office markets are already operating with very low vacancy which is slowing down new transactions. Strong demand trends have put upwards pressure on rentals, especially in prime markets, a trend that is expected to continue,” said Shishir Baijal, chairman and managing director, Knight Frank India.

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