India’s office rentals see 3.6% growth; Pune, Chennai, Bengaluru top performers

Hyderabad’s Gachibowli macro-market achieved a 12-year CAGR of 6.2%, highlighting its potential for long-term investments, as per the report. File photo.
| Photo Credit: Nagara Gopal

:

The average effective rentals across major cities in India have grown by 3.6% on a five-year compound annual growth rate (CAGR), according to what is being said to be India’s first commercial property rental index by the Indian Institute of Management Bangalore (IIMB), in collaboration with CRE Matrix.

‘Invest in commercial property for higher returns’

This index, backed by over a decade of transactional data, aims to provide accurate insights into rental trends across India’s ten major cities, covering 90% of Grade A/A+ office stock.

“Traditionally, Indian real estate markets have relied on anecdotal evidence or skewed data from limited transactions. The IIMB-CRE Matrix CPRI addresses these challenges by incorporating a spatiotemporal modelling approach. Unlike conventional indices that focus on average prices, this methodology considers real and hypothetical transactions, predicting current rental prices for active leases. This unique approach ensures a comprehensive and balanced view of the market,” the study states.

The index tracks quarterly effective rental trends since 2012, reflecting normalised values to exclude anomalies like rent-free periods or abnormal escalations. It captures data from Bengaluru, Hyderabad, Mumbai, Gurugram, Pune, Chennai, Noida, Navi Mumbai, Delhi, and Thane, with sub-indices for 36 macro-markets.

The index identifies Pune as the top-performing city with a 12-year CAGR of 6.9%, followed by Chennai and Bengaluru at 5.5% and 5.3%, respectively. Among the macro-markets, Pune’s Central Business District recorded the highest value in Q3 2024.

Regarding the post-pandemic, the report also notes a recovery in office rentals since Q2 2022, with 92% of quarters showing positive growth.

Bengaluru most consistent

Meanwhile, Bengaluru consistently reported positive rental growth in 44 out of 50 quarters, making it the most stable market. Hyderabad’s Gachibowli macro-market achieved a 12-year CAGR of 6.2%, highlighting its potential for long-term investments. Delhi’s South region experienced a notable quarterly increase of 9.4%, the highest across all cities.

The city’s top-performing macro-markets include Whitefield, South Bengaluru, and Outer Ring Road with Whitefield leading the growth at a 12-year CAGR of 6.3%. These areas have significantly contributed to Bengaluru’s position as a preferred destination for office spaces, shows the report.

The index highlights that Bengaluru has consistently adapted to market demands, reflecting robust fundamentals in its office real estate sector. Despite global economic uncertainties and post-pandemic challenges, the city’s effective rentals have steadily increased, solidifying its reputation as a tech-driven commercial hub in the country.

Venkatesh Panchapagesan, Chair of the Real Estate Research Initiative at IIM Bangalore, emphasized the significance of the index, stating, “India’s journey towards becoming a $25 trillion economy by 2047 requires robust tools like the CPRI to ensure transparent decision-making and effective capital allocation in the real estate sector.”

Abhishek Kiran Gupta, CEO of CRE Matrix, expressed optimism about the future, stating, “The high-quality data and methodologies underpinning the CPRI will empower stakeholders to navigate market complexities and capitalize on growth opportunities.”