Office market in top six cities receiving a steady recovery
The office market of the top six cities have been recovering steadily over the last two years, with vacancy levels dropping from 21% in H2 2012 to less than 19% in H1 2014. This has primarily been led by the gradual increase in absorption across the top six cities – Mumbai, NCR, Bengaluru, Pune, Chennai and Hyderabad. Chennai and Bengaluru have led in terms of growth in absorption, at 47% and 29% respectively during H1 2014. However, Hyderabad, Pune and Mumbai are expected to post the maximum year-on-year growth in absorption during H2 2014, at 96%, 85% and 76%, respectively.
The IT/ITeS sector continues to lead in terms of share in total absorption across all the cities, except for Mumbai. Unlike residential markets, where prices have increased sharply over the last three years despite a slowdown in sales volume, the growth rate achieved in the rental value of office space has been relatively constrained.
During H2 2014, we forecast Pune and NCR to lead in terms of growth in the weighted average rental value, compared to the rest of the cities. While rents in Mumbai will continue their downward spiral, cities like Bengaluru, Chennai and Hyderabad are expected to witness a subdued growth.
Source: Knight Frank
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