The festive season of 2024 has brought a remarkable spike in consumer spending, which has had a positive ripple effect on the retail sector across various significant markets, including Auckland, China, Hong Kong, Bangkok, and Bengaluru. According to the recently released Q4 2024 APAC Cap Rates report by Colliers, these regions have capitalized on the surge in consumer activity, translating into notable growth for retail businesses. In Bengaluru, a stark contrast is observed in the commercial property market where supply has lagged behind demand. Consequently, this disparity has led to a decrease in vacancy rates, indicating a robust demand amidst limited availability. Meanwhile, Mumbai’s real estate landscape tells a different story where the office supply has seen an exponential increase—sixfold year-on-year—yet remains insufficient to match the rising uptake in 2024. This situation reflects a strong commercial property market, even as the supply-demand dynamics remain complex. As Grade A rental and capital rates in Bengaluru’s main business corridors climb, the Outer Ring Road, North Bengaluru, and Whitfield are experiencing heightened transactions. The strategic availability and specifications of these Grade A properties contribute to stable cap rates ranging from 8.0% to 8.5%. The report underscores the significance of festive consumer activity on retail and commercial landscapes, setting the stage for a deeper analysis of these trends.
Consumer Spending Trends and Retail Growth
The surge in consumer spending during the festive season has proven pivotal for various sectors, particularly retail. Regions like Auckland, China, Hong Kong, Bangkok, and Bengaluru have witnessed remarkable growth as they adapted to increased consumer enthusiasm. This period typically sees higher disposable income being channeled into retail purchases, and 2024 has been no exception. In Bengaluru, the influx of consumer spending has led to a notable rise in organized retail transactions. This uptick is largely fueled by increasing capital values in high-street locales, which have directly correlated with elevated revenue shares for retailers. The festive spirit, characterized by shopping sprees and promotional activities, has not only invigorated local economies but has also significantly impacted the performance of commercial properties in central business districts. Consequently, the retail sector is benefitting from enhanced foot traffic and consumer engagement, solidifying its importance as a key economic driver in these markets.
Market Dynamics in Bengaluru and Mumbai
The commercial property market in Bengaluru is experiencing a significant transformation, particularly in its main business corridors where Grade A office spaces are witnessing remarkable demand. The increased activity has led to a surge in rental and capital rates, reflecting the growing appetite for premium commercial spaces. Specifically, the Outer Ring Road, North Bengaluru, and Whitfield regions have emerged as hotspots, driven by favorable specifications and availability of Grade A floorplates. As a result, cap rates have remained relatively stable, hovering between 8.0% and 8.5%. On the other hand, Mumbai presents a more complex scenario, where the office supply has increased dramatically, yet this growth has not translated into proportionate rental increases. The year’s change has marked the highest demand growth in the last quarter, although the influx of new supply has necessitated a careful evaluation of rental trends across different micro-markets. Interestingly, despite a slight YoY decline in industrial transaction volumes, Mumbai’s industrial supply has seen a 15% increase, which has helped maintain stable cap rates. This juxtaposition of supply and demand illustrates the intricacies within the commercial real estate market as both cities navigate their unique challenges.
Conclusion: Economic Implications of Inflation and Market Trends
The economic landscape as we move into 2025 is further complicated by inflationary pressures, with the Consumer Price Index (CPI) inflation soaring to 5.22% in December 2024. This figure starkly contrasts with the preceding three-month average of 5.63%, indicating a significant jump in urban inflation rates since Q3 2024. Ajay Sharma, Managing Director of Valuation Services at Colliers India, attributes this spike in inflation to various factors, including robust consumer activity spurred by the festive season. As the commercial property market continues to evolve in both Bengaluru and Mumbai, stakeholders are advised to closely monitor these trends. The interplay between consumer spending, retail growth, and inflation will play a crucial role in shaping the future of these markets. Understanding these dynamics will be essential for investors, developers, and policymakers aiming to navigate the challenges and seize the opportunities that lie ahead in 2025 and beyond.
