With extensive hiring, rising income levels and consistent growth of the start-up and unicorns in the city, Bengaluru’s real estate market has shown noteworthy improvement during the first half of the year 2022. In their latest report, Knight Frank India noted that Bengaluru’s commercial market has maintained its historical trend to remain the top performer in office leasing with a share of 31% of the total office transactions in the country in H1 2022. The office market recorded transaction volumes of 7.7 mnsq ft. This is an impressive 117% YoY increase in H1 2022 from 3.6 mnsq ft in H1 2021. New completions for office space was recorded at 5.8 mnsq ft, higher by 11.5% YoY from 5.2mnsq ft in H1 2021.
Bengaluru’s residential market remained undeterred by the Omicron wave in early 2022 as the city registered strong sales and launch volumes in H1 2022. The city registered 80% YoY increase in residential sales to be recorded at 26,677 housing units. New launches also saw a significant upsurge by 59% YoY with the addition of 21,223 units in H1 2022.
Knight Frank India today launched the 17thedition of its flagship half-yearly report – India Real Estate: H1 2022 – which presents a comprehensive analysis of the residential and office market performance across eight major cities for the January – June 2022(H1 2022) period. The report highlights that Bengaluru’s office leasing in H1 2022 witnessed the third highest number of transactions since 2012. The report also cited that the hiring activity in the city increased by 35% during Jan-May 2022 when compared to the corresponding period in 2021 leading to an increase in demand for office leasing in the city.
On the aspect of rentals, the average transacted rent value moved up by11% in 6-month period during H1 2022.The Information Technology sector continued to be main driver for the Bengaluru office market. The demand for office space in Peripheral Business District (PBD) North picked up immensely recording a share of 29% in H1 2022 compared to 5% in H1 2021.
On the aspect of residential performance, Bengaluru residential market remained optimistic with strong momentum in new launches indicating a strengthening of developer confidence and a steady improvement of the buyer sentiment in the city. The total number of home sales in H1 2022 was seen at 26,677 units, making Bengaluru the third largest residential market in the country. The weighted average price of residential units in Bengaluru has increased by 9% YoY to INR 5,358 per sq ft.
South Bengaluru remained the largest market accounting for 38% sales. With homebuyers favouring luxury lifestyle and bigger apartments, the share of sales in the INR above 10 mn category has increased from 19% in H1 2021 to 24% in H1 2022.
OFFICEMARKET UPDATE: H1 2022 (JANUARY – JUNE 2022)
BENGALURU OFFICE MARKET SUMMARY
|Parameter||2021||2021 Change (YoY)||H1 2022||H1 2022 Change (YoY)|
|Completions in mnsq ft||11.9||27%||5.8||12%|
|Transactions in mnsq ft||12.2||-1%||7.7||117%|
|Average transacted rent in INR/sq ft/month||73||-9%||81||13%|
Source: Knight Frank Research
From sector wise transaction split in H1 2022, Information Technology sector leads with 42% followed by Other services sector with 26%. IT sector also recorded the maximum increase in share of total transactions from 24% in H1 2021 to 42% in H1 2022. The co-working sector accounted for 16% of the total leasing registering a volume of1.3 mnsq ft in H1 2022.
Bengaluru’s hiring activity increased by 35% during Jan-May 2022, predominantly led by the digitally native Information Technology sector. Bengaluru comprises about 40% of all the technology companies in India. It also leads the share of unicorns, which are privately held start-ups with a valuation of US$ 1bn or more.
From the aspect of micro-markets, PBD North accounted for the largest share of total office space leased by 29% followed by PBD East with 26%. The demand for office space in PBD North picked up enormously during H1 2022 recording the maximum increase in share of total office lease space from 5% in H1 2021 to 29% in H1 2022.The rising demand for satellite offices propelled by concurrent residential demand has boosted the office transactions in this region.
Shantanu Mazumder, Executive Director – Bengaluru at Knight Frank India said, “Bengaluru’s corporate sector has started to call back employees to office while keeping to a hybrid model of work. We expect the strong momentum in office leasing in Bengaluru to continue in 2022-23 as the physical occupancy rates are expected to pick up in the coming months. Barring the risk of another wave of COVID-19 infections, ‘back to office’ trend will ramp up the demand for readily available stock. Furthermore, robust hiring activity especially in tech, global captives, start-ups etc. will encourage large occupiers to proceed with expansion of office space.”
RESIDENTIAL MARKET UPDATE: H1 2022 (JANUARY – JUNE 2022)
BENGALURURESIDENTIAL MARKET SUMMARY
|Parameter||2021||2021 Change (YoY)||H2 2021||H2 2021 Change (YoY)|
|Launches (housing units)||30,607||54%||21,223||126%|
|Sales (housing units)||38,030||61%||26,677||135%|
|Average Price in INR/ sq ft||INR 5,150||4.4%||INR 5,358||9%|
Source: Knight Frank Research
Launches and sales trend
Source: Knight Frank Research
From the aspect of the residential price movement, the weighted average price of residential units in Bengaluru has increased by an estimated 9% YoY to INR 5,358 per sq ft. In the last few quarters, the residential prices in Bengaluru have been gradually increasing supported by strong demand. Due to the strong residential demand in the last two years, the volume of unsold inventory has significantly declined. The inventory in H1 2022 has reduced to 61,887 units, lowest in a decade and quarters-to-sell (QTS) has sharply declined to 6.5, lowest since 2013.
From the Micro-market perspective, South Bengaluru remained the largest market accounting for 38% of the total sales followed by East market with 32% of the total sales. South Bengaluru remained the most favoured region garnering a share of 51% of the total launches, a marked increase from 35% in H1 2021. East Bengaluru accounted for 27% of the total launches in the city in H1 2022. North Bengaluru has emerged as one of the fastest growing residential hubs in the last few years luring both developers and the real estate buyers.
Shantanu Mazumder, Executive Director – Bengaluru at Knight Frank India said, “We observe that extensive hiring and rising income levels in the Information technology sector and consistent growth of start-ups and unicorns in the city continues drive the demand for housing in Bengaluru. In the last few quarters, the residential prices in Bengaluru have been gradually increasing supported by strong demand and rise in cost of construction. The increased cost of construction in the last few months is primarily transferred to the new launches along with a marginal price rise in the ongoing projects. The strong residential demand in the city suggests that the buyers have been able to withstand the price rise thus far.”