Manufacturing & Industrial sector leads Q3 leasing activity

• Gross leasing of 4.9 million sq ft in Q3 2024 was 18% higher q-o-q. Manufacturing/Industrial occupiers led with 27.0%, with IT/ITeS holding the second highest share. The latter, however, held a sustained quarterly average of around 28% (Q1-Q3 2024).
• The city’s net absorption in Q3 recorded 4.1 million sq ft, a 90% growth q-o-q, and the second highest after Q2 2022. The SBD submarket cumulatively accounted for 89% of Q3 net absorption, and Whitefield was the other top contributor.

Healthy supply inflow for two consecutive quarters

• Quarterly supply of 3.1 million sq ft came on stream in Q3, with all completions recorded in the SBD submarket. While supply was down 23% q-o-q, the estimated full-year supply is 13 to 13.5 million sq ft, on par with the past five-year annual average.
• Lower q-o-q supply amid healthy leasing activity caused a 60 bps q-o-q drop in vacancy, which stood at 13.3% at the city level. Vacancy by end-2024 is expected to remain in the range of 13–13.5% despite the strong supply inflow, driven by sustained demand momentum.

Rent growth for the quarter almost on par with 2023 quarterly average

• Bengaluru city rents rose 0.7% q-o-q, almost on par with the quarterly average rent growth during 2023. The highest rent growth was seen in the CBD and SBD North submarkets.
• Capital values recorded a q-o-q growth of 1.2%, almost on par with the average q-o-q growth from 2023. Yield rates recorded a marginal compression of 5 bps q-o-q.

Outlook: Healthy demand despite supply influx to keep city’s vacancy range-bound

• Around 13–13.5 million sq ft of net absorption is expected by end-2024, around 25–30% more than the previous two years. Bengaluru may continue to witness robust demand amid occupier portfolio expansion and by global companies establishing captive technology centres.
• Overall average rents are expected to be on an upward trajectory and grow by 3.5–4.0% y-o-y. This growth will be driven by tight vacancy levels, with prominent developers quoting higher-than-market-average rents amid the continued strong demand for space.