Bengaluru accounts for one-third of Q2 leasing activity across the top seven cities

• Quarterly gross leasing of 6.1 million sq ft in Q2 was the third highest ever for the city. Around 31% was contributed by IT occupiers, with Manufacturing/Industrial and BFSI sectors following, with respective shares of 29% and 26%.
• Net absorption of 2.2 million sq ft in Q2 was up 26% q-o-q, adding up to a healthy demand of 3.9 million sq ft for H1 2024. Sustained demand across occupier sectors resulted in a higher net absorption, with the SBD contributing around 65%.

Supply regained momentum amid rising demand for quality space

• Around 4.1 million sq ft was added in Q2, a 2.8-times growth q-o-q, compensating for the low supply last quarter. SBD and Electronic City submarkets each received 35%–40% of the Q2 supply. Estimated supply for 2024 stands at 14–15 million sq ft.
• While demand was strong, the surge in supply pushed vacancy up by 60 bps q-o-q to 13.9%. Vacancy by end-2024 is likely to range within 14%–14.5% amid rising demand for Grade A space.

CBD and Whitefield submarkets record the highest q-o-q rent growth

• Bengaluru’s overall office sector rents grew by a marginal 0.8% q-o-q, while on a y-o-y basis, rents were up by 3.4%. The CBD and Whitefield submarkets witnessed a 3%–3.5% q-o-q growth in rents.
• Capital values recorded a q-o-q growth of 1.6%, higher than the quarterly average growth in 2023. On a y-o-y basis, the growth was 6.5%. Yields remained almost unchanged, with a minor 6 bps drop q-o-q.

Outlook: Bengaluru to remain an office hotspot amid sustained demand and supply traction

• Supply by end-2024 is expected to range between 14–15 million sq ft with a complementary net absorption of 10–11 million sq ft. Strong preference for the city among occupiers is likely to ensure demand-supply balance, making vacancy range-bound.
• Quality supply inflow commanding higher-than-market-average rents and tight vacancy levels, particularly in prime markets, is likely to cause an overall rent growth of 4.0%–4.5% y-o-y.