The tide seems to have turned in favour of the Indian commercial real estate space not only on the leasing front but also on the rental yield side. Indian metro cities Mumbai, Delhi and Bengaluru have globally topped the list of 21 cities in terms of office rental yields, according to a report— Global Cities 2016—by real estate consultancy firm Knight Frank.

While Delhi and Bengaluru are new entrants on the list, Mumbai was featured on the last edition of the report. Bengaluru, Mumbai and Delhi lead the pack with rental yields at 10.5 per cent, 10 per cent and 9 per cent, respectively, while London and New York offered rental yields at 4 per cent.

However, current office rentals in Mumbai and Delhi are lower than the 2007 peak levels by 17 per cent and 19 per cent, respectively, while Bengaluru holds the fort with an 8 per cent growth, the report said.

Mumbai and Bengaluru feature among the list of top five global cites in terms of future rental growth as well while Delhi slips to 16th spot.

Shishir Baijal, chairman and managing director, Knight Frank India, said, “ Indian office market has been maintaining the healthy traction of 2014 and has clocked office space transactions of 18 million sq ft in the first six months of 2015 and we expect the year to complete at around 40 million sq ft which is the highest since 2011. This is a record year for Bengaluru which is expected to transact around 12 million sq ft of office space in 2015. Even though at an aggregate level, the vacancy is at 17 per cent, the challenge is to get good quality office spaces across prime business districts, wherein vacancy is in single digits.”

“Due to a robust demand from start-ups and e-commerce, other than IT/ITeS, BFSI and manufacturing, office rentals are surging. Going forward, we foresee demand to continue outstripping supply,” he added.