Mumbai // Prime office rents in Mumbai are falling, as companies move from the expensive central business district to cheaper areas of the city.
Average rents in Mumbai’s central business district fell by 4 per cent in the first quarter of this year compared with the same period a year earlier, according to a report by JLL.
“Mumbai has got another wake-up call to re-look at its exorbitant property prices,” said Ashutosh Limaye, the national director of research at JLL India.
“One of the major reasons behind the fall in rentals is the shift in demand from Mumbai’s central business district to the secondary business districts in its suburbs,” he said. “As demand for residential properties moves towards suburbs farther away from the city centre, so does the demand for office spaces. The city’s central business district is losing its sheen over the past five to six years, and rentals here fell by 3.4 per cent in the last year.”
Nariman Point in the south of Mumbai used to be the city’s main business hub. Over the past few years, however, businesses have been moving to suburban areas north the city, where there is more supply of good quality office space available. This has led to one of these locations, Bandra Kurla Complex (BKC), with modern office developments that are home to many multinational companies, becoming the “de facto central business district” of Mumbai, according to JLL.
But companies are also moving to secondary business districts further north of BKC and in central Mumbai, which are more competitive. Improved transport connectivity, with the launch of the metro last year in the suburbs, is also helping to make other areas more viable options for companies.
“There are many options to bargain for lower rentals among the secondary business districts, thanks to the supply pipeline,” said Mr Limaye. “Although BKC may be the new central business district, it has only a 10 to 11 per cent share of the overall supply, whereas rentals are lower in secondary business districts (central and north) and supply is high.”
Prices at BKC were 223 rupees (Dh12.88) per square foot per month in the first quarter of this year. By comparison, rents were 105 rupees to 110 rupees in secondary business districts in the north and 160 rupees to 170 rupees in central Mumbai.
Mr Limaye said this was “a proposition still hard to ignore for most corporates”.
A survey by CBRE released this month showed that BKC was the 15th most-expensive place in the world to rent office space at US$102 a square foot per year. Nariman Point was ranked 30th at $76. The findings also showed that New Delhi’s Connaught Place had the fifth-most expensive office space globally, at more than $156 a square foot.
“The contrast in Mumbai’s office market is that the city has 17 per cent vacancies, which is not healthy,” Mr Limaye said. “That said, there is a shortage in availability of the right product offering – superior quality supply – at the right location.”
Sao Paulo and Moscow were the only locations that fared worse than Mumbai in the comparison of central business districts of leading cities worldwide, with declines of 5 per cent and 24 per cent respectively, the report revealed.
There was a 3 per cent increase in rents in Dubai, according to the report. London had the largest increase in central business district rents at 12 per cent.
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