1. Office space rentals in Mumbai to see upward pressure in coming years

Office space rentals in Mumbai to see upward pressure in coming years

If you have taken an office on rent in Mumbai, you could be under stress soon since rentals could be upwards. A recent JLL study has shown that Mumbai's real estate values have bottomed out in comparison to Q2 2015.

By: | New Delhi | Updated: October 17, 2016 3:54 PM
The JLL study – Global Real Estate Outlook – says Mumbai’s office space occupiers will have to face upward revisions in rents in the coming years. (Reuters)

If you have taken an office on rent in Mumbai, you could be under stress soon since rentals could be upwards. A recent JLL study has shown that Mumbai’s real estate values have bottomed out in comparison to Q2 2015.

The JLL study – Global Real Estate Outlook – says Mumbai’s office space occupiers will have to face upward revisions in rents in the coming years. Compared to Q2 2015 when Mumbai’s rental values had bottomed out, the city will now start to see acceleration in its rental value growth from Q2 2016.

The research tracks rents (in local currency) for prime Grade-A office spaces in several cities’ CBDs (or their equivalent) across the globe. It then puts these cities on a ‘rental clock’ representing the cyclical nature of office rents (see below). In Mumbai, Bandra Kurla Complex is the de-facto CBD. The original CBD of Nariman Point long lost out to newer micro-markets due to the evolving needs of occupiers, which it has not been able to provide.

“Mumbai, being the financial capital of India, has traditionally seen a lot of office space take-up by BFSI players and IT/ ITeS (mostly back-office operations of BFSI firms) in different micro-markets. Moreover, showing faith in India’s economic growth, many occupiers have been in expansionary mode,” Anuj Puri, Chairman & Country Head, JLL India.

In a report last year, JLL had forecast that average city-level rents will continue to rise and that the city and suburbs will move from being tenant-oriented to being landlord-oriented after 4-5 quarters. A tenant-driven market indicates oversupply of office space, falling rents, weak demand and big incentives available to tenants, whereas a landlord-orientated market indicates limited supply of office space, rising rents, strong demand and no incentives for tenants.

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