Bengaluru office space supply hits 2-year high in Q3

Supply grew by 133% compared to the prior quarter.

Grade A office supply in Bengaluru hit an eight-quarter high in 3Q23 with the SBD submarket accounting for 59% of the project completions, according to JLL.

 Prominent buildings completed in the quarter were Bagmane Capital Angkor Block 1, Embassy TechVillage Block 3A-Iris, Prestige Tech Pacific Blocks 1 & 3 and RMZ Ecoworld Block 32 in SBD ORR, Chalet Cygnus and Kalyani Camellia in Whitefield and Embassy Business Hub Block 1 in PBD North.

Here’s more from JLL:

Despite healthy leasing and an overall pre-commitment rate of 23% in new completions, vacancy moved up by 120 bps q-o-q to 13.8% due to the record high volume of supply (5.38 million sq ft) that was added in the quarter. An increase in vacancy was observed across CBD, SBD (ORR South East) and Whitefield submarkets.

Improved momentum in 3Q23 leasing activity

With decreasing global headwinds on India’s office market, Bengaluru’s office market regained momentum in 3Q23, with occupier demand recording 58% q-o-q growth. Net absorption witnessed a 27% q-o-q growth as well, amid healthy fresh leasing and pre-commitments (around 23%) in 3Q23 completions.

The SBD submarket dominated quarterly office demand, accounting for 75% of new leases recorded in 3Q23, with the ORR corridor leading the way. Flex led with the highest share (about 27%) of 3Q23 leasing volume, with tech following closely. The Manufacturing/Industrial segment witnessed steady growth as well and contributed about 17% of the quarterly leasing activity.

Rents strengthen by 1.0% q-o-q

Prominent existing projects, new completions and active submarkets continued to witness rent increments on a q-o-q basis. Significant rent growth was seen in the CBD and Whitefield submarkets.

Investor interest in core and build-to-core assets in key corridors remained steady. Hence, capital values moved in tandem to keep yields steady in the quarter, with appreciation more visible in CBD and Whitefield. Going forward, core asset yields are expected to compress.

Outlook: Vacancy to stay range-bound amid healthy demand and supply

The demand outlook should remain healthy in the short to medium term despite the ongoing global economic slowdown, with flex operators expected to contribute significantly to demand. The availability of a young talent pool and the entry of new Global Capability Centres (GCCs) across tech, financial services, engineering/manufacturing should continue to be the main demand drivers going forward.

Large-scale deal closures and space enquiries are expected to boost project completions in the coming quarters and keep the supply inflow healthy in the city. Bengaluru is expected to continue to be one of the highest contributors to supply in India’s office market.

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