Air India plans to reduce the minimum bid requirement for leasing space in its former headquarters in Mumbai?s upmarket Nariman Point as the debt-laden airline seeks to attract tenants to monetise its flagship property.
?The airline will now accept bids for a minimum of half a floor, tweaking its earlier condition that only tenants looking at leasing an entire floor will be considered,? an official of the state-run carrier told FE.
The airline?s attempt to lease out 12 out of 23 floors of the building (1.5 lakh square feet) has seen little response so far with State Bank of India (SBI) being the only new tenant.
In January 2013, SBI had leased four floors, measuring about 54,000 sq ft, for a total rental of about R20 crore a year. The airline presently occupies four floors ? 14th, 21st, 22nd and 23rd ? while TCS occupies two floors in the building. Other floors have been lying vacant since January 2013, when Air India moved its headquarters to New Delhi.
?Since most floors are empty, portions of these empty floors, apart from the four floors, are also being used by us. We will vacate them once companies take them on lease,? said the official.
The Directorate General of Shipping (DGS) and the income tax and service tax departments had also shown interest in renting parts of the building, but high rentals prevented the deals from materialising .
The high rentals being sought by Air India may be one of the reasons why the airline has found it difficult to attract tenants, say consultants. Air India is seeking R350/sq ft a month in rent from their Nariman Point property, which is one of the highest in the area.
?The lower floors of the Air India building were picked up by State Bank of India at about R280-290 per square foot. However, Air India has been asking for about R350 for the higher floors, which is too high and so the response from the occupants has been timid,? said an industry source.
The Central Business District of Nariman Point commanded the highest office rentals in the country at one point, with rentals soaring up to R500/sq ft a month in 2007-08. However, since then, the demand for office space in the area has declined with a large number of companies choosing to shift base to the suburban Bandra-Kurla Complex and Andheri.
According to sources, the airline company had framed the initial request for proposal for the Nariman Point building based on the model followed by residential properties, asking for floor rise charges, a practice not common in the commercial property market.