Bengaluru office leasing activity hits 3.1m sq ft in Q1

Nearly 40% of the activity is from the manufacturing and industrial industry.

According to JLL, leasing activity in Bengaluru’s office sector in 1Q24 stood at 3.1 million sq ft, at par with 1Q23 numbers. 

Manufacturing & Industrial occupiers led the way in the quarter with a 37.1% share, with IT/ITeS accounting for the second biggest share and a sustained average of 26% across the last four quarters. The flex sector also maintained its growth momentum with its 11% share.

Here’s more from JLL:

The city’s net absorption during the quarter stood at 1.7 million sq ft, largely due to delayed completions and few tenant exits. On a q-o-q basis, the leasing activity was also lower, though expected, given the significant closures seen in the last quarter of 2023. The SBD submarket cumulatively accounted for the largest share of net absorption, while Whitefield was the other top contributor.

Low supply in 1Q amid delayed occupancy certificates

Quarterly supply stood at 1.5 million sq ft, headlined by the SBD submarket, which accounted for 72.4% of the new project completions. While there was a significant drop in supply on a q-o-q basis due to delays in receiving occupancy certificates, the estimated supply for the entire year stands at 12–13 million sq ft, at par with the past five-year annual average.

Despite the low supply, the healthy leasing activity resulted in a 20-bps q-o-q drop in vacancy, which now stands at 13.3% on an overall city level. The vacancy by end-2024 is expected to remain in the range of 13%–14% despite the strong supply inflow, driven by sustained demand momentum for quality office space.

Rents grow q-o-q at a faster pace than the 2023 quarterly average

Bengaluru city rents rose at a rate of 1.3% q-o-q, higher than the quarterly average rent growth during 2023. The highest rent growth was seen in the CBD and SBD City submarkets.

Capital values recorded a q-o-q growth of 1.4%, again faster than the growth seen in 2023 on average. Yield rates remained steady q-o-q.

Outlook: Office occupiers’ preference for the city to continue

Net absorption is expected to touch around 9.0–10.0 million sq ft by end-2024, at par with the previous two years, though supply may be slightly curtailed. Amid footprint expansions by occupiers across sectors and several global companies setting up their captive technology and back-office centres, Bengaluru should continue to witness robust demand.

Overall average rents are expected to be on an upward trajectory and grow by 3.0%–3.5% y-o-y. This growth is expected to be driven by tight vacancy levels, with prominent developers quoting higher-than-market-average rents amid the continued strong demand for space.

Note: Bengaluru Office refers to Bengaluru's overall Grade A office market.