Mumbai office vacancies to go up

Written by Rachana Khanzode | Mumbai | Updated: Dec 3 2010, 15:19pm hrs
Commercial property space in central Mumbai is set to see a surge of about 22-25% in vacancy by the end of calendar year 2011, as nearly an additional four million square feet (sq ft) of commercial space is expected to come up by then. This would make the central area amongst the largest commercial spaces area with a total of about 9-9.5 million sq feet as compared to South Mumbai (Nariman Point and Fort) that would have in total about 5 - 6 million sq feet and Bandra Kurla Complex (BKC) about 7- 7.5 million sq feet. Demand for commercial property in central and south Mumbai has not picked up even when rentals in these areas have been stagnant since last year, say research analysts in the industry. Low demand and high supply in the region is expected to keep the rentals under pressure, they added.

The central area, that includes Worli, Lower Parel, Parel, and nearby locations are witnessing a vacancy of as high as 15-17%, with an available commercial space of about 5-6 million sq feet at the moment. Rentals in the central area are now as low as Rs 150-170 per sq feet from Rs 290-320 per sq feet in 2008, when demand was at its peak. Considering there is a huge supply in the central part, we feel pricing will remain stagnant for some time now and probably a correction will take place next year, Abhishek Kiran Gupta, head of research and REIS, Jones Lang LaSalle India said.

Developers like Peninsula Land are building commercial properties like Peninsula Business Park and Center Point in Lower Parel and Parel, respectively. IndiaBulls already has One Indiabulls Center and is coming up with the Indiabulls Finance Center. Omkar Developers is coming up The Summit - Business Bay at Worli, in addition to other developers who are building commercial properties in this area.

Prakrut Mehta, national director-office & industrial agency, Knight Frank India, said, A lot more corporates and private equity players are now preferring BKC over the Central part. The BKC had seen a marginal price increase last year. However, it has been constant since then. The reasons largely are the large and spacious offices and convenience for employees in traveling to BKC. J P Morgan, Macquarie, RBS, ABN AMRO and Societie Generale are some of the firms that have either moved out or are expected to be exploring options outside of South Mumbai.

The BKC currently has a commercial space of about 6.5 m sq.ft. and is witnessing a vacancy of about 4-5% at the moment. Rates in BKC are about Rs 200 per square feet. Rates during the peak were at about Rs 250-330.