Solid Growth in India Strengthens Asia Pacific Markets

Real Estate markets in Asia Pacific registered a modest uptick of 3% y-o-y in quarterly gross leasing activity, underpinned by solid growth in India. Improvements to leasing volumes were, however confined to a limited number of markets.

While India held its ground, other regions including Greater China, South East Asia and Australia saw double digit declines in leasing volumes. Delhi was again the regional standout with IT and professional services making substantial contributions to leasing volumes. 

The pace of Asia Pacific rent growth accelerated modestly to 1.1% (3.6% y-o-y) in 3Q 2017 up from 0.7% (3.6% y-o-y) in 2Q17. While Singapore was the top performer, Bengaluru came in a close second. The tight vacancy and solid occupier demand in Bengaluru has helped the rents trend-up in the region. However, double digit vacancy remains a drag on rent growth for overall Mumbai and Delhi NCR despite healthy leasing activity.  

The vast majority of markets throughout Asia Pacific recorded either flat rents or a moderate growth. Among all major cities in India, Mumbai leads in the overall average office rentals values and Capital values numbers. Amongst Asia Pacific markets, Bengaluru stood third in quarterly capital value growth on account of strong and sustained occupier fundamentals. 

Aggregate gross leasing for the four major Indian cities (Mumbai, Bengaluru, Delhi NCR and Chennai)was up by 40% y-o-y in the third quarter of 2017. Broad-based demand has picked up the slack from IT/ITeS firms which are renewing and consolidating to control costs. Delhi keeps its position as the out-performer supported by big-ticket transactions and strong pre-leasing of the large upcoming supply pipeline. Co-working operators are active in Bengaluru and Mumbai. 

India led Asia’s upturn last year, but the economy has faltered since with demonetisation and policy changes combining with export weakness. Even so, India continued to perform well in this quarter with Mumbai, Bengaluru and Chennai showing strong positive rental growth. After a strong third quarter and a mega-deal, investment in India trend at its highest level on record.

Globally, Asia Pacific will continue to be the world’s most dynamic region. We expect full year leasing volumes to be stable or trend up slightly through the end of 2017 and we hold a similar view for 2018, with India bouncing back as a more transparent and stable destination post the policy changes.

Source: JLL Research