Business confidence in commercial real estate is rising, fueled by strong demand and market performance in key APAC cities. Bengaluru and Mumbai lead growth in office and retail spaces, with rising capital values and stable cap rates. Consumer activity and urban inflation shifts continue shaping the sector despite increased supply.
A surge in consumer spending during the festive season has fueled significant growth in commercial real estate across key Asia-Pacific (APAC) markets, according to Colliers’ Q4 2024 APAC Cap Rates report. Cities such as Bengaluru, Mumbai, Auckland, Hong Kong, and Bangkok saw heightened demand for retail and office spaces, contributing to market resilience.
In Bengaluru, commercial supply trailed demand, leading to lower vacancy rates and upward trends in rental and capital values. Prominent business corridors, including Outer Ring Road (ORR), North Bengaluru, and Whitefield, witnessed increased transactions of Grade A office spaces. The availability of high-specification spaces helped maintain cap rates between 8.0% and 8.5%. Similarly, Mumbai’s office space market expanded, with supply increasing sixfold year-on-year. However, demand remained strong, ensuring market stability despite the rapid expansion.
The Mumbai commercial sector also experienced notable improvements, with the highest year-on-year demand growth recorded in Q4 2024. While rental hikes were controlled mainly due to increased supply, some micro-markets saw price appreciation as space availability diversified. “Further, Bengaluru has witnessed improved transaction volumes in organised retail, with rising capital values in high street areas attributed to increased consumer activity during the festival season, leading to higher revenue shares,” noted Ajay Sharma, Managing Director of Valuation Services at Colliers India.
In the industrial sector, Mumbai recorded a 15% supply increase, though transaction volumes slightly declined on a year-on-year basis. Cap rates remained stable throughout Q4 2024 despite market fluctuations. Meanwhile, inflationary pressures intensified, with CPI inflation rising to 5.22% in December 2024, driven by urban price increases. “This increase in inflation is attributed to the significant growth in urban inflation from Q3 2024,” Sharma added.
The APAC region’s commercial real estate landscape continues to evolve, shaped by shifting market dynamics and sustained demand. As cities adapt to growing investor interest and consumer activity, commercial spaces remain a strong investment avenue for businesses seeking long-term stability and growth.
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