Bengaluru gross office leasing volume soars by 83% to 5.5m sq ft in Q2

This caused net absorption to see a 4.5x jump from the previous year.

Bengaluru recorded gross leasing volumes (GLV) of 5.5 msf in Q2, a robust growth of 83% on a yoy basis though lower than the exceptionally strong activity in the previous quarter, according to data from Cushman and Wakefield. 

Healthy fresh leasing resulted in a net absorption of 2.5 msf, a 4.5x jump on an annual basis. 

Here’s more from Cushman and Wakefield:

A number of large deals were closed by global multinationals in the quarter, thereby highlighting the strong appetite for quality office space as they move ahead with their expansion plans. Fresh leasing accounted for around 60% of GLV in the quarter, pointing towards healthy occupier confidence. pre-commitments' share of quarterly GLV rose to 35% from around 28% in the previous quarter. 

Demand for large spaces remained strong with large deals (>100,000 sf) constituting 56% of quarterly GLV, similar to the previous quarter. Growth in Global Capability Centres (GCCs) was another key feature of the quarter with GCC deals by IT, BFSI and manufacturing firms accounting for nearly 39% of quarterly GLV. 

The BFSI sector led quarterly leasing volumes with a share of 38% followed by IT-BPM with a 25% share. Flex space operators occupied the third spot in quarterly GLV with a share of 14% but the share of engineering & manufacturing, traditionally a bellwether segment, was just 8%. Outer Ring Road dominated quarterly leasing activity with a share of 65% followed by 14% by Peripheral East. 

On a half yearly basis, GLV stood at 12.3 msf, more than doubling as compared to the same period last year. Net absorption in the first half of year was 6.1 msf, a nearly 3x jump over H1 2023, highlighting the rapid recovery that the market witnessed in H2 last year has gained significant strength in the current year.

Supply addition across multiple micromarkets; headline vacancy rate falls 

Bengaluru recorded a new supply of 2.2 msf in Q2, a 24% fall from the previous quarter and a 17% decline as compared to the same period last year. The lower supply in Q2 is largely due to the delays in grant of occupancy certificates (OC) for certain projects. However, on a half year basis, new supply stood at 5.1 msf, a growth of 6.1% over the first half of last year. 

The supply in Q2 was spread across CBD, Peripheral East, Peripheral North and Peripheral South and marked the first in several quarters that ORR, the prime office corridor, did not record any supply. However, the supply pipeline for ORR as well as Bengaluru, as a whole, remains strong for the remainder of 2024 and developers are likely to expedite completions given the strong demand. Headline city-wide vacancy rate fell by 30 bps on a quarterly basis with ORR and Peripheral North witnessing sharp fall in vacancies. 

Headline rentals remain stable 

Headline rentals remained stable on a quarterly basis and is likely to remain rangebound in the near term with supply keeping pace with demand. However, given the robust demand dynamics, higher rentals will continue to prevail in existing Grade A properties with high demand and tight vacancies, as well as in upcoming premium properties in prime micromarkets.