For decades, Bangalore has been one of India's main pillars in commercial real estate, often called the "Silicon Valley of India." Boasting a growing IT sector, an electric start-up ecosystem, and a swelling population, Bangalore is one of the top business hubs not just in the APAC region but across India.

Bangalore has seen a tremendous boom in its Commercial Real Estate (CRE) sector. Such expansion factors include an overall booming economy, increasing foreign investments, and major multinational companies' presences.

Bangalore's City Profile and CRE Landscape

Bangalore boasts the highest yield for Grade A office assets in the APAC region, with yields at between 8.5% and 8.9%. Bangalore's real estate market remains a haven for investors in search of strong returns.

Largest Office Market in India

Bangalore has consistently ranked as India's largest office market, accounting for a third of the office leasing that happens in the country. It is becoming an increasingly important player with home-grown talent capable of supporting digital workplaces that now comprise 25% of India's total digital workforce. This gives the city a much larger appeal to not just nascent start-ups but also established corporations.

Leasing Trends and Sectoral Demand

Bangalore office space absorption reached an all-time high in gross absorption at 6.3 million sq. ft. in Q3, 2024. Substantial absorption was mainly led by foreign-origin companies, accounting for around 80% of the Grade A office space demand. U.S. companies recorded the highest amount in the volume, which is close to 50%.

The transactions for the first nine months of 2024 in the engineering and manufacturing sectors comprise larger deals accounting for 64 percent.

New completions in Outer Ring Road (ORR) Micro market constitute 42 percent new completions. It is an area that has been drawing both global tech majors and startups. Bangalore has thus accounted for nearly one-third of India's total office demand and supply till the end of Q3 2024. This makes it a critical component of the country's CRE landscape.

Flex Spaces

The flexible workspace market has been rapidly evolving, especially in dynamic urban environments like Bangalore, where companies are seeking adaptable solutions to meet their diverse operational needs.

In Q3 2024, the flex market in Bangalore experienced notable activity, with the Secondary Business District (SBD) leading the charge by contributing approximately 72% of the total flex transactions.

This dominance highlights the area's attractiveness to new-age companies and startups, which are drawn to its prime location between residential catchments and key commercial areas like the Outer Ring Road (ORR) and Central Business District (CBD).

With around 0.7 million square feet of Grade A flex space demand reported in the city, a striking 90% of transactions involved spaces exceeding 50,000 square feet. This trend indicates a growing preference for larger, enterprise-level flex spaces that can accommodate evolving workforce requirements and promote collaboration. Companies are increasingly recognizing the value of flexible office solutions that allow them to scale operations swiftly, adapt layouts for various team dynamics, and respond to the changing demands of a hybrid work environment.

As a significant player in this landscape, ClayWorks embodies the essence of flex spaces by providing environments that foster collaboration, creativity, and productivity.

Micro-Market Updates

Bangalore's commercial real estate landscape features distinct micro-markets catering to various sectors. The Central Business District (CBD) serves flex and consulting firms, with high demand for Grade A office space keeping rental prices elevated and vacancies low, averaging 25,000 to 30,000 sq ft per deal.

The Secondary Business District (SBD), including Koramangala and Indiranagar, attracts startups and new-age companies, with deal sizes averaging 50,000 to 55,000 sq ft.

North Bengaluru is emerging as a growth corridor due to its airport proximity and metro developments, with average deal sizes of 62,000 to 67,000 sq ft, appealing to the aerospace, IT, and manufacturing sectors.

Future Market Outlook

Bangalore office market continues its uptrend, with diversification in tenant demand now not limited to technology only but the BFSI, health, and engineering sectors as well.

Vacancy levels are likely to remain low in CBD and SBD areas, but the periphery of Electronic City and North Bengaluru may see relatively higher vacancy levels, thus attracting occupiers based on budget and space.

Bangalore CRE market stands like a shining beacon of growth and opportunity both for India and APAC. The city is well-positioned to continue leading the commercial real estate scene, anchored by strong office absorption rates, diverse occupier bases, and upcoming Grade A supply. It will dovetail cutting-edge infrastructure with a young workforce and influxes of global investments in order for Bangalore to stay ahead at the forefront of shaping innovative and sustainable workspaces for years to come.