Bangalore, where global companies are flocking to set up their major offshore centres, is among the most cost-effective destinations in the world in terms of the occupancy costs.
In a survey by the global property adviser DTZ Debenham Tie Leung, Bangalore's office cost per workstation is $3,290 per annum and Chennai's is lower at $2,310. As against this, Mumbai costs $8,490 and Delhi $6,650.
In DTZ's ninth annual Global Office Occupancy Costs survey, Bangalore and Chennai figures in the list at 103 and 110 positions respectively out of 117.
Mumbai and Delhi are ranked 20 and 43, respectively, placing them among the most expensive office locations in the world. The two cities were ranked 40 and 60 respectively in 2005.
The most expensive office space in the world is in London (West End), Washington DC and Hong Kong, in that order. In the Asia Pacific region, Mumbai and Delhi rank as high as 4th and 7th respectively whereas Bangalore is 10th.
Mumbai and Delhi have experienced one of the largest increases in real estate costs, according to the 2006 survey, with year-on-year growth of 27 per cent and 29 per cent respectively, behind Hong Kong in the Asia Pacific region.
The survey, is a guide to accommodation costs in prime office locations covering 117 business districts in 46 countries worldwide.
Ranking for the 2006 survey focussed on a per workstation basis to better reflect the costs of accommodation.
India is one of the fastest growing economies in the world and has a rapidly expanding real estate market. This is fuelling the surge in office occupancy costs across the country.
According to Ankur Srivastava, managing director, DTZ Debenham Tie Leung India, "The continued demand for space from the IT/IT-enabled services and business process outsourcing sectors is the main driver behind the growth in costs, along with the trend of large occupiers seeking consolidation and large built-to-suit facilities."
London (West End) continued to maintain its pole position in the global ranking with occupancy costs of $18,740 per workstation per annum despite a drop of 3 per cent year-on-year from 2005.
Washington DC claimed the second position with $15,370 per workstation per annum. Notably, Hong Kong posted a strong increase to $15,000 per workstation per annum and moved up 12 places to become the world's third most expensive location.
The remaining cities in the previous top ten list experienced minor changes in ranking. In Western Europe, six locations were amongst the top ten. London (West End), Paris, London (City), Frankfurt and Dublin remained while Luxembourg, a new addition, claimed tenth position with $11,260 per workstation per annum.
Similarly, ranking for the ten least expensive office locations remained almost unchanged from last year. Similar to 2005, the Philippines remains the least expensive office location with an average cost of $1,290 per workstation per annum in Makati and 860 per workstation per annum in Ortigas.