MUMBAI’S COMMERCIAL REALTY SET TO SEE OVERSUPPLY
For the first time in last five years,
Mumbai’s commercial real estate market
is headed for an oversupply with a total of 16.02 million sq ft of new commercial
office space expected to enter the market in 2009. Demand though has been dipping
steadily. According to property consultancy Jones Lang LaSalle Meghraj (JLLM), the
demand for office space has dropped 60-80% compared to the peak period from late 2005
to early 2008. Some parts of the city had seen rental appreciation of over 100% in the
period on the back of big demand from the Banking, Financial Services and Insurance
(BFSI) and IT/ITeS sectors. “Rentals are set to go down a further 20-25% in Mumbai
owing to the mismatch in supply and demand. BFSI which generated the most demand for
the Mumbai market has been hit the most in the recent times,” says Vivek Dahiya, CEO
of property consultancy GenReal.
A JLL-M report ‘The Slope of Descent’ says: “The BFSI and IT/ITES sectors - the two
most prominent office space occupiers in the country, have been adversely affected in
the economic downturn. The BFSI sector suffered globally with the collapse of major US
and UK banks resulting in many financial corporates putting their expansion plans on
hold. BFSI demand for office space in India’s business districts fell in 2008, and it
is projected to remain sluggish in the short term.”
The mismatch for many years has been on the supply side, which has been reversed now.
Throughout 2006-08, Mumbai trived on new companies coming in. A number of
investment banks, management
consultancies, private equity firms and others who entered the Indian market
wanted to take up space in Mumbai, mostly south Mumbai. “The only demand that is there
in the market today is from the non-BSFI corporate segment,” says Kaustuv Roy,
executive director at Cushman & Wakefield.
The first quarter of 2009 saw a total supply of 2.47 million sq ft of new space in
Mumbai of which the total absorption of space is only 35%. The total absorption was
only 896,454 sq ft. Rentals have been steadily falling in most major micro-markets of
Mumbai.
Rentals in Nariman Point are down 13% compared to last quarter and about 30% down
compared to a year ago. Worli, Lower Parel, Bandra Kurla Comlex and Andheri-Kurla are
the worst hit with rentals coming down by 38%, 39%, 27% and 33%, respectively, over
the last one year.
This is the best time for businesses to relocate to locations that offer lower rentals
and bring down their operating cost. “There is some leasing activity going on but only
for the price conscious which is mainly for relocation. The business expansion demand
has completely dried out in the city,” says Aniruddh Wahal, national head, strategic
occupier services at JLL-M.
Courtesy:- ET dt:- 17-04-09
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