Bengaluru’s office rental market is on the verge of a significant upswing, with projections indicating a rent increase of 4.0% to 4.5% by the end of 2024, as detailed in a recent report by JLL. This anticipated growth is underpinned by a robust office supply pipeline, with an expected 14 to 15 million square feet of new office space entering the market by year-end. Importantly, net absorption is expected to parallel this influx, estimated at 10 to 11 million square feet, thereby ensuring a balanced demand-supply dynamic that stabilises vacancy rates.
The dynamism of the city’s office sector is evident, particularly in the impressive quarterly leasing volume of 6.1 million square feet recorded in the second quarter of 2024, marking it as the third highest on record. A noteworthy 31% of this leasing activity was attributed to IT occupiers, while the Manufacturing/Industrial and BFSI sectors contributed 29% and 26%, respectively. This vibrant leasing environment has resulted in a 26% quarter-on-quarter surge in net absorption, which reached 2.2 million square feet, reflecting sustained demand across various industry sectors. Moreover, the surge in office supply is remarkable, with 4.1 million square feet added in Q2 alone—an increase of 2.8 times compared to the previous quarter. This new supply has primarily benefited key submarkets such as the SBD and Electronic City. However, the overall vacancy rate has seen a slight uptick, reaching 13.9%, a trend reflective of the increased supply. By the end of 2024, vacancy rates are projected to hover between 14% and 14.5%, driven by the persistent demand for Grade A office spaces. Notably, the Central Business District (CBD) and Whitefield submarkets have demonstrated the highest rent growth, with a quarter-on-quarter increase of 3% to 3.5%, emphasising their premium market status.
This evolving landscape not only signifies economic resilience but also highlights a growing focus on sustainability within office developments. Many new projects are increasingly integrating eco-friendly practices and energy-efficient designs, addressing the pressing need for sustainable work environments. As Bengaluru continues to attract both domestic and international firms, the emphasis on sustainability in office spaces becomes crucial in meeting the expectations of modern tenants who prioritise green living and working conditions.
