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Bangalore leads Indian cities in “City Momentum Index”

February 9, 2015 / By  

JLL recently published its City Momentum Index (CMI). Covering 120 cities across the globe, the CMI measures a city’s short-term socio-economic and commercial real estate momentum over a three-year horizon as well as measuring drivers of longer-term sustainable momentum in terms of education, innovation and the environment. The CMI incorporates a city’s rate of office construction and absorption, price movement and the attraction of a city’s built environment for cross-border capital. Cities with high rankings are those where change is fastest and they warrant attention, for their momentum can pose both opportunity and risk.

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India’s only entry in the top 20 league is Bangalore at 12th, ahead of Singapore and New York and clearly leaving its domestic competitors Mumbai and Delhi way behind, at 35th and 53rd, respectively. Bangalore’s success has many contributors. The technology sector continues to be a major driver of city momentum, as both the tech giants and start-ups are investing in new technologies, infrastructure and generating jobs. Bangalore has usually shown alignment between demand and supply, thus demonstrating better predictability and rational movement in rents acceptable to occupiers and capital prices acceptable to developers and investors. In the past 12 months, Bangalore constructed 7.8 million sq ft of office space (as much as Delhi, but 2.2 million sq ft more than Mumbai) and leased more than 9.3 million sq ft of it, 33% more than Mumbai’s or Delhi’s leasing. It is India’s only city enjoying rents higher than its pre-global financial crisis levels, while Mumbai Metropolitan Region and Delhi National Capital Region are still 18-40% under their previous peak rents. This maturity of office markets makes institutional investors confident and comfortable, which is evident in capital flowing into the city’s core assets. It received about USD 0.5 billion of FDI from January 2013 to June 2014, 27% more than Delhi and 36% more than Mumbai.

However, not all is lost for Mumbai and Delhi, which, due to a current weaker outlook for their commercial real estate markets, could not make it into the top 20. They still feature strongly on socio-economic momentum and long-term fundamentals; however, there is a risk of dropping standards in education, innovation and environment measures, in which Bangalore excels. They can gain on growth of the technology, advertising, media and information (TAMI) sectors. The Delhi-Mumbai Industrial Corridor is yet another contributor that will boost their chances to break into the top 20 in years to come.

It will be an interesting time ahead to see if Bangalore retains its top slot among Indian cities by keeping its two rivals at bay and if any of the Tier II cities of India break into this league, like Vietnam’s Ho Chi Minh City did this time round.

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