Pune, Chennai touch previous average rental peaks of 3Q2008 in 1Q

In 1Q 2017, Pune and Chennai have managed to recover from the fall in office rents seen after the global financial crisis (GFC). While Bengaluru was the first office market across India to surpass its previous highest average rentals in 3Q2014, it is now joined by the IT hub of Pune and the manufacturing hub of Chennai. Another leading IT city, Hyderabad, is well on its way to cross its previous peak in one of the following quarters.

Source: JLL REIS

The rental indices for Pune and Chennai now stand at 100.7 and 100, respectively. The base for indexing rental levels is 3Q2008. The growth in rents of these markets shows their inherent strength and attractiveness for occupiers. Among these four markets, office rents increased marginally in 1Q 2017 in select sub-markets of Pune and Hyderabad while Bengaluru rents remained stable.

Select sub-markets of Chennai also witnessed increase in rents even as its stock-weighted average remained stable. Rental growth, however, is expected to strengthen in Bengaluru, Hyderabad and Pune through 2019. Lower vacancy rates and sustained demand in the established office corridors of these cities will help in better rental appreciation during the forecast period of 2017-19.

For example, Bengaluru’s secondary business district (SBD) as also Hyderabad’s HITEC City and Gachibowli sub-markets are likely to see major rental appreciation during through 2019. The underlying reasons being low base rents, quality assets and better infrastructure – apart from continued healthy demand.