According to the latest Cap Rates Report released by Colliers, the office sector has recorded the most movement in cap rates in Q2 2024 across the Asia Pacific markets. Sales transaction volumes across the APAC region have remained relatively low, with lease transactions accounting for majority of the volume. Interest rates are stable and H2 2024 will likely see more investment activity.
There has been healthy movement in the office and retail sectors in the Mumbai region; office rentals have jumped 1-2% QoQ and some premium micro markets have recorded rentals that are 20% higher than the average, owing to superior construction and global amenities. With the CPI inflation dropping below 5% and RBI targeting inflation of 4.5% for FY-25, the consumer spending is expected to see an upward trajectory, allowing retail landlords to achieve better lease terms.
In Bangalore, the cap rates for the logistics & warehousing assets continue to remain flat Q-o-Q with significant volume registered in lease transactions. Similarly, rental rates and capital values for Grade A commercial office segment have been flat with no significant change. Though interest rate regime is stable, the impact on the cap rate movement is limited due to transaction volumes and perceived risk not changing much.
“Rentals of Grade A establishments in Mumbai have jumped 1-2% QoQ and in June-24, Mumbai witnessed one of the highest lease rental transactions in India. This surge in rental prices reflects the growing preference of occupiers who are willing to pay a premium for well-equipped, premium spaces. In Bangalore, investors participation has been low in the organized retail segment, with the exception of high street retail where some traction has been recorded. This has been limited to leasing and therefore cap rates continue to remain stable.” says Ajay Sharma, Managing Director, Valuation Services, Colliers India.
