Business confidence across Asia-Pacific continues to strengthen, driven by growing consumer demand and easing interest rates, according to Colliers’ Q4 2024 APAC Cap Rates report. The report highlights a surge in consumer spending during the Q4 festive season, particularly benefiting retail sectors in major markets such as Auckland, China, Hong Kong, Bangkok, and Bengaluru.
Bengaluru’s Commercial Market Sees Strong Growth
Bengaluru’s commercial real estate sector experienced strong demand, leading to lower vacancy rates due to a supply shortfall. Along key business corridors, rental and capital rates for Grade A office spaces saw a significant increase. The Outer Ring Road (ORR), North Bengaluru, and Whitefield emerged as key locations for high-value transactions, driven by the availability of well-specified floorplates. Capitalization rates for these areas remained stable in the range of 8.0% to 8.5%.
Additionally, Bengaluru’s organized retail sector witnessed an uptick in transaction volumes, with capital values rising in high street areas. This increase is attributed to heightened consumer spending during the festival season, leading to stronger revenue shares for retailers.
Mumbai’s Commercial Real Estate Market Expands
Mumbai’s office market recorded a sixfold increase in supply year-on-year, yet the overall demand outpaced new inventory, resulting in a robust market. The demand for office space saw the highest quarterly growth in 2024, though rising supply prevented significant rental hikes except in select micro-markets where availability remained limited.
While the industrial real estate segment in Mumbai recorded a 15% supply increase, transaction volumes were slightly lower compared to the previous year. This led to stable cap rates in Q4 2024.
Macroeconomic Trends and Inflation Impact
Inflationary pressures were evident, with Consumer Price Index (CPI) inflation rising to 5.22% in December 2024, compared to a three-month average of 5.63%. This was largely attributed to rising urban inflation in Q3 2024, impacting economic dynamics across the region.
Ajay Sharma, Managing Director, Valuation Services, Colliers India, commented on the findings: “The rising transaction volumes in Bengaluru’s organized retail sector and strong demand for commercial space across key markets indicate sustained business confidence. Mumbai’s industrial segment saw increased supply, which helped keep cap rates stable, while Bengaluru’s Grade A office market saw strong demand pushing capital values upward.”
Outlook for 2025
As interest rates continue to decline and economic activity remains strong, the commercial real estate markets in Mumbai and Bengaluru are expected to maintain their growth trajectory. With consumer spending rebounding, particularly in retail and office sectors, investors and developers are likely to see continued demand for prime assets across key business hubs.
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