Expanding dimensions of corporate corridors

With the Indian economy picking up pace, the demand for office space is once again on the rise. Companies are focusing on expansion, diversifying into new fields and consolidating their operations into single buildings or linked premises for greater workplace efficiency.

The landscaped campus is seen with increasing frequency and workplaces are close to being comfort zones with facilities like gymnasiums, cafeterias, fine dining, even entertainment. There is a marked emphasis on 'Green' structures, intelligent buildings, 24X7 workplaces and even the 'Walk to Work concept.

In Mumbai, the demand has seen a visible shift from the Central Business District (CBD) area towards Secondary Business Districts (SBDs) like Lower Parel, Bandra-Kurla, Andheri-Kurla. In addition, the Goregaon- Malad-Borivali belt in the western suburbs, Thane-Mulund in the central suburbs and Navi Mumbai are preferred locations.

The quality and facilities in office buildings too have gone upscale, with facilities that are on par with top clubs. From plush reception areas to hi-tech security, fine dining and recreational facilities, everything is available these days.

Concrete perspective
Dilawar Nensey, Joint Managing Director, Royal Palms Estate India Ltd., concurs. "Since the beginning of this year we have noticed a major surge in enquires for office space from the following sectors - Information Technology, Financial Sector and Media (Film/TV). It is well known that the uptake of office space by IT & Financial companies forms a huge percentage of the overall office space in the Mumbai market. As such these industries are seeing major growth in their sectors and therefore will have a major requirement for office space in the near future," he says.

According to him, as with most offices, the key factors that make certain commercial buildings preferred over other are the location, connectivity and maximum usage of available space.

"The demand for office spaces would be higher in the following areas; Goregaon east, Malad, Thane and Navi Mumbai. This will be due to attractive price still available in these locations, good quality buildings, and availability of good quality man power," he points out.

Current trends
Abhishek Kiran Gupta, Head - Research & REIS, Jones Lang LaSalle India, points out that Mumbai city's office market witnessed transactions totalling 827,105 sq ft (76,841 s qm) in 1Q11. In addition to the banking, financial services and insurance (BFSI) sectors, demand for office space in the prime micro-markets of Mumbai came from the consulting, aviation, IT/ITES and other industries. The IT sector's recovery from the financial meltdown has shifted activity towards the suburban precincts of the city where significant IT supply is in the pipeline.

Five buildings in Mumbai's prime micro-markets completed in 1Q11, adding 795,562 sq ft (73,910 sq m) of office space and bringing total operational stock in Mumbai's prime micro-markets to 29.4 million sq ft (2.81 million sq m), with an overall vacancy level of 13.2%.

Rental values in the premium micro-markets of the CBD and SBD BKC showed a marginal increase in 1Q11 due to the latent demand for office space in this micro-market. However, recent completions recorded in Mumbai's SBD have only moderate pre-commitments, keeping rents range bound in select secondary districts of Mumbai.

12-Month Outlook
With rental values showing signs of improvement over the past three quarters, rents are expected to continue to rise in the near term. Improving confidence among office occupiers and investors on the back of India's economic resurgence is expected to drive transaction volumes in 2011. However, with diverse supply conditions prevailing across different sub-markets in Mumbai, the rises in rentals and capital values are expected to vary according to location.