APPD Market Report Article


February 22, 2024

Dr Samantak Das, Head of Research, India


INR 98.5


Robust q-o-q growth in office demand

  • Bengaluru’s office market continued its strong leasing momentum from the previous quarter, recording a 34% q-o-q growth in gross leasing volume during 4Q23. For the full year, gross leasing surpassed even 2019 levels and stood at 15.5 million sq ft. Net absorption witnessed a 20% q-o-q growth and was at a six-quarter high, backed by healthy leasing.
  • The SBD submarket continued to dominate 4Q23 office demand, accounting for 67% of new leases recorded. ORR corridor was the highest contributor (48%). Tech sector occupiers held the highest share (26%) of the quarterly leasing volume, followed closely by the Manufacturing/Industrial segment. Flex continued to grow and contributed around 14% of the quarterly leasing activity.

Lower q-o-q supply during 4Q23

  • The 4Q23 supply was around 50% lower than 3Q23, which was an eight-quarter high. The SBD submarket accounted for 78% of the quarterly completions, with prominent buildings RMZ Ecoworld 4D, Sattva Knowledge Point Tower A and Prestige Tech Cloud Park – Cumulus block being completed. Bagmane Solarium City – Helium East block was the only project that became operational in the Whitefield submarket.
  • Amid improved leasing momentum and lower supply during 4Q23, city-level vacancy declined by 30 bps on a q-o-q basis. While all other submarkets recorded a q-o-q drop in their vacancy levels, the SBD submarket recorded a marginal increase due to a considerable supply addition.

Rents record marginal growth q-o-q

  • Bengaluru’s office sector recorded marginal rent growth during 4Q23, largely driven by rent appreciation in prominent existing and recently completed projects.
  • 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: Strong demand momentum backed by quality supply

  • Demand trends in Bengaluru’s office sector are anticipated to remain strong in the short to medium term, backed by steady occupier expansion plans. Rising demand for space from GCCs, manufacturing/industrial and financial services occupiers is likely to boost office space leasing traction. Continued expansion by flex operators is expected to add to the momentum.
  • Quality supply is slated to enter the city’s Grade A office space over the next few quarters, backed by healthy demand trends. While supply inflow is planned across all submarkets in the city, SBD ORR is likely to contribute the most. With demand largely on par with supply, vacancy levels are expected to remain range-bound.

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

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