Office space rentals skyrocket in B'lore

Owing to a mismatch between demand and supply of office space, rentals in the Bangalore's central business district (CBD) have peaked to Rs 90 per sft a month. This represents an increase of close to 25 per cent over last year's values.

Off-CBD locations are also witnessing a similar trend and the rent now ranges between Rs 60 per sft and 70 per sft a month. In the south-east quadrant (Sarjapur-Outer Ring Road) of the city, the rental values range from Rs 50-60 per sft per month. On Bannerghatta Road, rentals range from Rs 50-60 per sft a month.

In Whitefield (locality housing a number of IT companies), which registered a drop in the first two quarters, rentals are stable at Rs 25 - 35 a sft per month. This is attributed to large supply of around 6.4 million sft in the pipeline here.

According to Knight Frank's India Office Market Review for third quarter (Q3) 2007, "The CBD has a very limited supply with only the UB City being added to the stock. This is the main reason for rentals to shoot up in addition to the city witnessing robust leasing activity and continued investor interest for pre-leasing office space in the upcoming projects."

The suburban and peripheral areas continue to offer new projects with large floor plates and their growth potential together with excess supply has ensured lower rental costs.

On the vacancy levels, CBD and off-CBD locations ranged between 1 per cent and 3 per cent owing to a supply shortage. The vacancy rates in the rest of the markets (off-CBD, suburbs and periphery) have decreased to levels below 7 per cent. However, the micro-markets of Whitefield is an exception as excess supply here has resulted in vacancy rates of over 20 per cent.