2024 - Bengaluru Commercial Real Estate Market Facing Challenges

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  • 9th Jan 2024
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2024 - Bengaluru Commercial Real Estate Market Facing Challenges
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In 2023, Bengaluru experienced a 14.3 percent decrease in commercial transactions, totaling 12.5 million square feet. Knight Frank India's report attributed this downturn to the impact of inflation in the US and a deceleration in the technology sector, a key player in Bengaluru's office space demand.

Diverse Sectors Sustain Leasing Activity

While the technology sector showed moderation, sectors like Global Capability Centres (GCC), flex spaces, and India-facing businesses provided momentum to office leasing in Bengaluru. This diversification in leasing was highlighted in Knight Frank India's report titled 'India Real Estate: Residential and Office (July - December 2023)'.

Insights from Real estate industry experts

Vivek Rathi, Director of Research at Knight Frank India, reflected on the market trends. He noted that despite Bengaluru's high office space absorption in the previous year, the slowdown in the IT sector led to a reduction in transactions. Nevertheless, Bengaluru maintained its status as one of India's most sought-after cities.

Bengaluru commercial real estate rental growth is robust

Despite a decrease in transaction volumes, Bengaluru saw a robust growth in rents. The limited availability of Grade A office spaces in Bangalore drove a 6.6 percent increase in average rental rates to Rs 86.4 per square foot per month.

Comparative Analysis Across Major Markets

In contrast to Bengaluru's struggles, the combined office transactions across eight major Indian markets, including Mumbai, NCR, Pune, Chennai, Ahmedabad, Kolkata, and Hyderabad, rose by 15 percent to 59.6 million square feet.

City-Specific Trends

Mumbai and the National Capital Region (NCR) both witnessed an increase in office space transactions and supply, showing varying trends compared to Bengaluru.

Bengaluru property market dynamics

Despite an overall drop in vacancies across major cities, Bengaluru experienced a slight increase. Rathi predicts a rebound in the office segment by the second half of 2024, anticipating recovery in markets like the US.

The report noted a shift in leasing influences in Bengaluru. While third-party IT services saw a decline, GCC, flex, and India-facing businesses had a positive impact on leasing activities.


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