Mumbai ahead of Paris and New York in office rentals

Mumbai has emerged as the fourth most expensive office location in the world, displacing Paris, Moscow, Singapore, Dubai and even New York. India’s financial capital was quoting a rental of Rs 440 a sq ft in 2007.

According to “Office Space Across the World” —a global report by real estate services firm Cushman & Wakefield —Mumbai’s Central Business District (CBD), Nariman Point moved up from 5th position in 2006 to 4th this year. Nariman Point witnessed annual rental growth of 60%, the report said.

The Indian financial markets have been doing exceedingly well over the last few years, and this has lead to the entry of a multitude of foreign investment banks and institutional fund houses. These have typically gravitated to Mumbai, leading to a surge in demand while lack of vacant stock at required locations or new supply continues to plague the market. This has lead to a phenomenal increase in rentals similar to what was witnessed in the early 1990s. C&W’s joint MD (India) Sanjay Dutt, said, “Most micro markets in Mumbai saw an upward trend in rental values largely due to very low vacancy and lack of new supply in these micro markets as projects were delayed. The city saw only approximately 0.45 million square feet of supply in 2007 with it largely being non-IT and essentially absorbed by the banking & financial Institutes, media & insurance.” He added that the growth of Indian economy that led to corporate expansion has also impacted the market. Similarly in Gurgaon, where prime supply has been essentially pre-committed, has also seen a rise rental. “However, high rental values witnessed across the country would not be sustainable beyond 12 months given the significant IT supply planned to enter the market in during 2008” he said. Within Asia Pacific region, India captured three of the top 10 most expensive locations with Mumbai -Nariman Point and Central Mumbai - Worli (Rs 40/ sq ft) on 3rd and 4th position respectively and New Delhi’s Connaught Place (Rs 330 sq ft) at 6th position. The significant rental growth witnessed in India has also placed eight India micro markets in the top ten locations in terms of rental growth, the report said. The highest growth was achieved by Kolkata’s Rashbehari Connector with an increase of 86% followed by Mumbai’s Suburban micro market Powai at 83%. In Mumbai, suburban location such Andheri, Malad and Mumbai – CBD recorded 71% 64% and 60% respectively. Gurgaon in NCR witnessed the highest appreciation in the region at 47% while New Delhi – CBD recording 46%. In the Southern cities, Hyderabad’s CBD (Begumpet/Raj Bhavan Road), emerged as the biggest rental riser with 44%. While other markets within cities like Pune (CBD), Chennai (CBD) and Bangalore (ORR) witnessed increase of 27%, 24% and 26% respectively. (via Economic Times.)