Indian Cities Lead Globally in Terms of Office Rental Yields

By siliconindia | Thursday, 15 October 2015, 12:29 Hrs

BANGALORE: Be it office or a home rental, this sector of business in India is raking in the money. Owing to the increased demand of office rentals, the yield of the sector also witnessed a growth. According to survey carried out by a property consultant, Knight Frank, Mumbai, Delhi and Bangalore are the leading cities across the globe to have earned the maximum annual rental yields, reports ET.

Outpacing all the global hotspots, these domestic markets have made the utmost benefit of the increasing demand of commercial property in India with 9.5-10.5 pct annual returns. Indian city, Bangalore topped the list of the survey whereas the annual returns of business hotspots like New York, Singapore, Tokyo, Hong Kong and London ranged between 2.9-7 pct.

Mumbai and Bangalore are estimated to grow to 22 and 16 pct respectively in future.

"Indian office market has been maintaining the healthy traction of 2014 and has clocked office space transactions of 18 million sq ft in the first six months of 2015 and we expect the year to complete at around 40 million sq ft which is the highest since 2011. This is a record year for Bengaluru which is expected to transact office space to the tune of around 12 million sq ft in 2015," said Shishir Baijal, Chairman & Managing Director, Knight FrankIndia.

The annual yields on office rentals had been on an all time peak in the year 2007 with 17 and 19 pct in Mumbai and Delhi respectively.

"Rentals across Mumbai and Delhi are still below the 2007 peak levels, though Bengaluru is an outlier wherein rentals are 8 percent more. Currently these cities are facing an acute shortage of good quality office space on the face of robust demand which is creating an upward pressure on office rentals that is expected to scale up in the range of 6-7 percent in the next six months year-on-year," said Dr. Samantak Das, Chief Economist & National Director of Research, Knight Frank India.

The commercial real estate business is expected a further boost by the Indian Real Estate Investment Trusts which would bag the sector investments worth $100 billion in the next few years.

Investors and occupiers are struggling to search for quality space for corporate purposes albeit the aggregate vacancy level being at 17 pct.

The country is riding the startup and e-commerce wave which have remarkably increased the demand for office rentals.

The demand is outpacing the supply and according to the survey it is going to continue in the near future. The brighter side is the commercial real estate market has made a strong comeback after 3 years of drip.