Bengaluru, Delhi and Mumbai among globe's top office cities
Building on a blueprint of a 21st century global city created after a series of experiments in an Illinois factory over 80 years ago, global real estate consultants Knight Frank have provided a detailed assessment of the best up and coming cities across the globe. The Indian cities of Delhi, Mumbai and Bengaluru all feature in the report.
There are myriads of factors to consider when buying property, particularly for commercial purposes. Perhaps the most pertinent of these, for those who have the luxury of choosing, is the city in which the property is located. The choice of city strongly affects business opportunities, return on investment, future prospects, and also logistical conditions such as crowding, transport and other facilities.
In the 2018 edition of its annual ‘Global Cities’ report, real estate consulting firm Knight Frank has attempted to better inform this choice. Among expert insights and city-specific case studies, the report highlights the major trends that can be observed across 40 of the world’s top cities.
The analysis is based on important long-term metrics, such as prime office yields, employment and property costs, forecasts for growth in income, cost of operating in a tech hub, etc. Additionally, the report also uses more simple yet effective metrics such as, ‘What $100 (Rs. 650 crores approximately) million could buy’.
While Indian cities were relatively lower down on the current performance metrics such as GDP and output, they performed exceptionally well in the long-term metrics mentioned above. The relatively low costs of property and labour in the country make Indian cities some of the most profitable commercial hubs in the world. The cities that featured in the report were Bengaluru, New Delhi, and Mumbai. Of these, Bengaluru displayed the best performance in the report by far, topping nearly every list.
Bengaluru tops Indian list
With relatively low property rates even by Indian standards, combined with a booming IT economy, Bengaluru topped a list of 34 cities from across the world for ‘Prime Office Yields,’ producing a yield of 10%. New Delhi and Mumbai followed closely in second and third on this list, at 9.2% and 8.5% respectively.
Also known as the silicon valley of India, Bengaluru unsurprisingly topped the international list for the 29 most affordable tech hubs in the world. With an average prime office rent of $9.65 (Rs.630) per square foot, Bengaluru’s Whitefield area is the most cost-effective tech hub in list, followed by tech districts in Kualalumpur and Madrid. Delhi’s Cyber Hub ranked 5th on the list, but was more than twice as expensive as Bangalore at $20.4 (Rs.1332) per square meter.
Bengaluru is also the city expected to see the highest increase of middle income households in India, poised for a 144% increase between 2017 and 2027 in households with incomes between $35,000 (Rs. 23 lakhs approximately) and $70,000 ( Rs. 46 lakhs approximately), second only to Shanghai at 153%. Mumbai came in at 5th on this list, projected to see an increase of 67%. In order to broadly judge the impact of these income levels on general urban behaviour, the report uses the increase in spending on eating out between 2017 and 2027 as a metric. Bengaluru topped this list again, forecasted to see a mammoth increase of 176.9% during the period, followed by Mumbai at 136.7% and Shanghai at 97%.
Another list topped by Bengaluru was that of the most cost effective city in terms of employment and property costs. The report used a hypothetical firm-size of 100 employees as a sample to determine the total costs of salaries plus property across 19 cities. Bengaluru was the cheapest, with the sum of salary and property costs to employ 100 people amounting to around $1.26 million (Rs. 8.2 crores approximately). No other Indian city featured on the list.
Lastly, regarding the amount of land $100 million could by, Bengaluru was way ahead of the rest of the Indian cities, and considerably far ahead of the world. In Bengaluru, $100 million could buy an impressive 523,385 square feet of land, ahead of Kualalumpur in second place with 445,739, and well ahead of Mumbai and New Delhi in 9th and 12th with 163,032 and 156,304 respectively.
Mumbai the skyscraper leader
The financial capital Mumbai did manage to outshine Bengaluru on one occasion, ranking sixth in the world on the Skyscraper growth index, expecting 1.8% growth in the upper floors in the next two quarters, well ahead of established global financial centres such as London (0%) and Honk Kong (1.1%).
Commenting on the report, Shishir Baijal, the Chairman and Managing Director of Knight Frank in India said, “The Global Cities: The 2018 Report offers a bird’s-eye view into the future of the most state-of-the-art world cities. Our spaces are being redefined. And, one of the most disruptive facets of the change in spaces where we work, live and the overall urban ecosystem would be acquisition of talent. Organisations would have to thoughtfully handpick global cities, zoom into smart office locations within them and tastefully shape these spaces in sync with the fascinations of the crème-de-la-crème workforce making the world work today. And, it is needless to state that the evolution would be driven by technology and smart intelligence.”
Meanwhile, the Chief Economist and the National Director for Research and Knight Frank India said, “Desires of the talent pool and rising disposable incomes are set to shape our urban environments in the near future. Global cities that are aspirational and successful in encapsulating an inherent wow factor are set to see the most dramatic transformation. We have already seen glimpses of the transformation with a shift in the expectations of mainstream occupiers. Today we see that the office space expectations of mainstream occupiers resembling those of niche sections such as the Start-up fraternity or the Googles of the world. The global trend holds true for select Indian cities such as Bengaluru and Mumbai.”
Investing in India
All these factors appear to be making India an attractive investment destination around the world. Moreover, growth in the consumer market is also seeing the amount of retail infrastructure in these big cities grow on a large scale, with the country expecting 34 new retail shopping malls in its top eight cities, including Bengaluru, Mumbai and New Delhi, by 2020.
