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Mumbai Commercial Leasing
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Brief on the Commercial Property Market in Mumbai in
February 2008
The Commercial Property market has grown at a furious
pace in Mumbai. In the year 2006 the Capital Values for
Example in Andheri East were say Rs.7000/- PSF and now
the same are nearly Rs.15000/-. The same goes for lease
rental values the same earlier were in the range of
Rs.75/- to Rs.100/- for Prime Commercial Properties and
the same are quoted more than double the price.
The real estate market in Mumbai is tipped to be the one
of the most expensive in the world and it is definitely
pinching a few pockets now. There is limited
availability of quality commercial offices on Sale and
Lease and hence the prices are sky rocketing. There will
be some good quality office space of large floor plates
coming up in Suburbun and upcoming locations like
Goregaon East etc. in a few years now. There is immense
dearth of good quality smaller offices in the range of
1000 to 3000 sq.ft and especially in furnished
condition.
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| Net Effective Occupancy Cost Analysis |
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Rs/Sq.ft./month |
Nariman Point |
Worli |
Lower Parel |
Bandra Kurla |
Andheri Kurla |
Malad |
Powai (IT) |
Powai (Non IT) |
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Avg. Base Rent* |
275 |
225 |
200 |
300 |
125 |
75 |
80 |
90 |
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Average Efficiency (%) |
80% |
75% |
70% |
65% |
65% |
75% |
75% |
70% |
* Includes notional cost of Interest on Security Deposit at
9% per annum, the base rent is a mix of A and B Quality
office premises available in the locations as specified
above. Efficiency % is the average/approximate
difference between the Carpet and Built Up area. The
older the building in Mumbai, the difference is less,
the Newer the Building the Ara goes up Higher. New
Emerging areas like Bandra Kurla and a few Buildings in
Andheri East have more than 40% difference between the
Carpet and Built Up Area. This is however, literally
becoming an expected norm in Mumbai as the availability
and the options are thin and hence the compromise is
from the Corporates.
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| Vacancy Rates |
Vacancies for all prime building across Mumbai have declined over the last few quarters With increased absorption levels the prime building in the CBD, central Mumbai, Bandra Kurla Complex (BKC) and Andheri Kurla micromarkets are witnessing limited space availability.
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| Demand |
Suburban locations and Central Business District have emerged as the most preferred locations. This quarter financial services were the primary demand drivers and absorbed, approximately 64% of the total space absorbed during the quarter. The suburbs of Andheri,
Malad and Powai have witnessed substantial absorption during the quarter.
Lotus Towers in Andheri West has reported a very high
lease rent transaction rate of Rs.300/- PSF for A +
Commercial Space, which is the most expensive ever in
Andheri West.
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| Supply |
With the ULC Scrapped, there will be openings in Airoli,
Thane and other suburban locations and Thane, Airoli,
Goregaon East and a few other locations in the Mumbai
Capital Region are likely to grow very well.
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| Values |
The capital values have increased heavily across the micro markets owing to positive investment
returns to investors who have invested a few years
before. The present day market looks a bit rough to
handle for Investors as there is limited upside in the
Capital Appreciation.
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| Major Office Destinations |
The demand for office space during the quarter was spread across all micro markets, though note evenly.
Andheri, Bandra Kurla Complex. Kalina, Worli and Lower Parel captured significant demand for large and medium size office space, while CBD
(Nariman Point and Off CBD precincts met the demand primarily for small size format spaces.
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| Major IT & ITES Micro-Markets |
Suburban precincts of Andheri Kurla, Lower Parel and Malad have captured significant demand originating from IT & ITES firm. New developments at these locations offer quality physical infrastructure at comparatively competitive prices, proximity to residential locations and robust telecom connectivity.
However, prices are becoming unaffordable for this
Sector in these locations and Companies will move out of
these locations in a few years.
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| Market Outlook |
The demand for commercial precincts is expected to remain buoyant with IT, ITES & financial services firms likely to be the primary demand drivers. The trend for
suburbanization is likely to continue, with suburban location (as well as Central Mumbai) capturing demand for small to medium format spaces. Central Mumbai is expected to witness supply of approximately 4.5 million ft2 during the next two years. Significant additions to supply levels are expected through 2008 to 2009 and the proposed sales of other Mill Lands are expected to infuse additional supply in Central Mumbai, which may lead to stabilization in the prices in the medium term. With new land parcels being released in Lower Parel as well as in Bandra Kurla Complex, supply increases are expected in the medium term. However owing to the continued demand increases, prices are likely to remain bullish.
In summary, with the supply getting impacted in the short term, as new projects may get marginally delayed, leading to an upward pressure on capital and rental value
for quality office space. However, the prices are likely to stabilize in the medium term on account of additions of additions to supply levels over the
next few years.
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MNC's,
Banks and various other companies. Mumbai being an
island city has limited Central Business Districts and
it becomes easier at times to make a choice considering
the few options you have. Mumbai is well connected by
Local Trains and an extensive network of BEST which runs
the local buses in Mumbai. Office premises in
February 2008 are at their peak in each location.
The pressure is on A quality Commercial Corporate office
complexes with limited availability left.