The National Capital Region (NCR) was ranked as the fifth most expensive CBD location in Asia Pacific according to the latest Asia Pacific Office market report from Cushman & Wakefield that compared the rental values of Central Business Districts (CBD) across Asia Pacific. Mumbai CBD was ranked 10th most expensive location in APAC. Traditionally expensive office destinations of Hong Kong, Singapore, and Tokyo continued to hold the top three positions, respectively.
Among a total of 25 cities across Asia, Bangalore and NCR saw the highest rental value rise in office market rentals in first quarter ended March 2012. Bangalore CBD recorded an increase of 18 percent while NCR – CBD recorded an increase of approximately 14 percent over the previous quarter ended December 2011. Jakarta – Indonesia (11.4 percent), Shenzhen – China (7.5 percent), and Adelaide – Australia (6.4 percent) were among the top five fastest growing office rentals. On the other hand, Hong Kong (-5%), Singapore (-4.7%) and Tokyo (3.9%) recorded corrections in their CBD rental values in Q1, 2012.
Commenting on the findings of the report, Ravi Ahuja, Executive Director, Office Transactions, Cushman & Wakefield India, said: “CBD locations across most cities of Asia particularly Hong Kong had witnessed a significant run up in rental and capital values over the last year; however, most Asian markets are currently depicting signs of stability with some key emerging markets of India still showing growth owing to the sustained demand generated specially from banking and consultancy, automobile, engineering and pharmaceutical sectors. There has been a clear preference for cost-efficient locations which is the reason traditional high cost locations have seen a slight correction, while cities such as Delhi-NCR and Bangalore have seen a stable rise. These markets are high on the value proposition with inherent demand for services/products as well as provide quality work force.”
Ahuja further added that the APAC market is expected to remain strong with a GDP growth forecast of approximately 5.7 percent in 2012 and 5.9 percent in 2013. He said that the growth is expected to be driven by the domestic demand supported by favourable economic and fiscal policies. “What remains uncertain is the impact of the economic and fiscal measures being taken in the Euro Zone countries,” he added.
The report revealed that New Delhi – CBD which continues to witness restricted and limited supply emerged as the most expensive office market destination in India at the end of Q1, 2012. With a rental value of INR 366/sq.ft./m and having witnessed a rise of approximately 14 percent over the previous quarter, rentals in the New Delhi CBD locations have surpassed rental values prevailing in Mumbai CBD and Bandra Kurla Complex (BKC). BKC will continue to see sustained supply and absorption owing to the continuing strong trend of relocation from South Mumbai to North Mumbai’s BKC (New CBD). A notable shortfall of quality space in the micro – market ensures that any new supply/vacancy in quality office space in NCR or BKC gets absorbed at a premium, thereby pushing the rental values upwards. Given the demand for space, many developers are now looking at refurbishing existing buildings to ensure that the momentum is maintained.
Bangalore which has traditionally been a high absorption market – 11 million year-on-year – witnessed the highest percentage rise in rental values of the CBD location. At 18 percent increase in rental values over previous quarter, it was the fastest growing office market across Asia in Q1, 2012.
Ahuja said: “Except for the uncertainty of the Eurozone, the next two years is expected to see stability in economic condition which is expected to propel a growth in the office market. With fundamental economic measures like monetary easing and policy decisions in the anvil, there is expected to be an increase in confidence amongst occupiers.”
Rest of the markets across India remained stable with no change to the rental values in the CBD locations. Chennai CBD recorded a rise if moderate 3 percent while Mumbai, Pune, and Hyderabad remained unchanged. Ahmedabad saw a rental increase of approximately 6 percent quarter-on-quarter owing to a steady interest from companies – both domestic and international to set up presence in the region, though the average size of office space requirement is restricted compared to other locations.
Cushman & Wakefield is a privately held commercial real estate services firm. It offers a range of services within five primary disciplines: transaction services, including tenant and landlord representation in office, industrial, and retail real estate; capital markets, including property sales, investment management, investment banking, debt and equity financing; client solutions, including integrated real estate strategies for large corporations and property owners; consulting services, including business and real estate consulting; and valuation and advisory, including appraisals, highest and best use analysis, dispute resolution and litigation support.
