Rentals in Whitefield expected to rise by 8-10% in two years

14 Apr 2023 CW Team

With the Byappanahalli-Whitefield metro project expected to be completely operational by mid-year, Colliers' recent report "Bengaluru Metro Rail: Key Office Market Impact" predicts that rentals in Whitefield will rise by 8-10% over the next two years. Rent increase will also be affected by overall occupier demand, macroeconomic variables, and so on. The Whitefield metro line, which became partially operational in March 2023, has been one of the most awaited lines in the city because it will connect the city's technology centre to the rest of the city.

Whitefield, Bengaluru's second largest office sector, has an office stock of approximately 40.4 million square feet, with vacancy levels hovering around 17.2% as of Q4 2022. However, the metro project is expected to increase occupant activity in the region because to improved accessibility and reduced commute time.

Arpit Mehrotra, Managing Director, Office Services - South India & Head of Flex | India said: “Metro's enhanced connectivity can foster the growth of offices in key locations. Improved connectivity, such as efficient and reliable public transportation options, can attract more businesses to set up offices in previously inaccessible or inconvenient to reach. With better connectivity, companies can benefit from a larger pool of potential employees who can commute to their offices easily and efficiently. This, in turn, can lead to a more diverse and skilled workforce, enhancing productivity and innovation. Moreover, better connectivity can also help businesses reduce operational costs, particularly in transportation and logistics. By having easy access to public transportation, companies can reduce their reliance on private vehicles and streamline their transportation and logistics operations.”

The report examines the progress of the metro project at various stages, as well as its impact on the commercial office market. It delves into how the Whitefield and CBD sectors have seen a steady increase of office supply and leasing over the years as the metro project has proceeded. According to the report, the average yearly supply in Whitefield increased by 10% between 2017 and 22 as the metro project's construction began, compared to the 2011-16 period. When compared to the planning stage (2011-16), gross leasing in Whitefield increased by 18% during the metro construction stage (2017-22).

In the CBD, approximately 64% of total leasing has occurred during the Metro operation period (2017-22) over the last 12 years, beginning with the development of the metro project. Furthermore, the CBD's office supply increased more than fourfold during the operating stage (2017-22), owing to the metro's predicted better connection.

“Bengaluru CBD has undergone a transformation through building upgradations, redevelopments and change in land uses since the metro work commenced. This has spurred occupier activity in the area, leading to a 79% increase in leasing during 2017-22 as compared to preceding 6-year period. Today, CBD market is experiencing low vacancy levels at 3.2%, despite increased supply, indicating occupiers’ need to be centrally located with superior connectivity. Metro project has undoubtedly transformed the office market of CBD and will positively impact the Whitefield market as well in next 2-3 years as Baiyappanahalli - Whitefield metro begins operations.” says Vimal Nadar, Senior Director and Head of Research, Colliers India.

“Overall, improved connectivity can create a virtuous cycle of economic growth, where more businesses set up offices in key locations, leading to more job opportunities and a more robust local economy,” added Mehrotra.

While demand for flex space has increased in the city over the years, the expansion of flex players in Whitefield has been limited due to its low connectivity with other parts of the city. For example, in 2022, whereas flex space accounted for 13% of total city leasing, it amounted for only 2% of overall Whitefield leasing. However, after the Whitefield metro is completely operating in 2023, flex operators are likely to increase their market position.