Bengaluru’s journey to 200 million sq ft of office inventoryNovember 21, 2023 / By
With a massive office stock of over 200 million sq ft, Bengaluru is the main contributor to India’s Grade A office inventory (~790 million sq ft). The city contributed to an average of 24-25% of India’s operational office inventory over the last five years. This high inventory volume has been driven by an average of 12-13 million sq ft of annual project completion during the period, with Bengaluru accounting for an average 28-30% of pan-India supply. Project completions have also been on track for first three quarters of 2023, with the city adding up to ~11 million sq ft in new Grade A office space.
The supply influx in the city is generally met with healthy demand, because of Bengaluru’s position as one of the leading tech and innovation hubs in the APAC region. The city consistently accounted for 25-26% of pan-India office demand over the last five years.
The growth in the city’s Grade A office market has been made possible by strong occupier demand momentum and the city’s continuing development. Average vacancy levels have remained in single digits for most of the last decade. Despite the rise in office vacancy rates across Indian cities during the pandemic, Bengaluru remains one of the few major Indian cities with tight vacancy levels, which indicated strong absorption level and healthy office demand situation.
Figure 1: Bengaluru’s rising stock with tight vacancy levels
Source: JLL Research & REIS, 3Q23
Bengaluru’s Grade A office market has transformed over the past few years, backed by rising Global Capability Centre (GCC) demand. GCCs are offshore units of multinational corporations that operate across the globe. These centres are responsible for providing various support services, such as IT, finance, human resources, and analytics, to their parent organizations.
Over the years, the city has evolved as a leading destination for GCCs not just in India (~42% of GCCs in India are in Bengaluru) but globally. This trend has paved the way for a higher influx of quality office space.
Bengaluru has also gained prominence in recent times due to the rising focus of developers on the quality of buildings and the adoption of sustainability programmes, which not only have driven occupier demand but have enabled higher institutional investments in the city’s office assets. Bengaluru’s growth as a start-up hub, backed by its well-developed tech ecosystem and competitive office rentals, has been one of the driving factors for its prolific growth in recent years. The expansion in the city’s office footprint can also be attributed to a increased demand for space from flexible workspace operators (Bengaluru holds a 36-38% share in pan-India flex stock) after the COVID-19 pandemic.
The city’s prospect for office sector expansion is also influenced by rising demand from manufacturing, healthcare, and life sciences occupiers. In recent years, the diverse talent pool and supporting government policies have resulted in higher absorption from these emerging sectors. While Outer Ring Road (one of India’s largest and prime office submarkets) and Whitefield continue to thrive as office destinations for tech occupiers, emerging corridors in the north and southern quadrants of the city are catering to healthcare and life sciences occupiers. This trend results in expanding the city’s office inventory across locations.
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