Of the five prime, alternate business districts in India’s commercial capital Mumbai, Lower Parel is the most affected by the global recession. In the last one year, Lower Parel witnessed the highest fall of — over 40% — in commercial office rentals. Compared to this, Bandra, Worli and Nariman Point, the three other prime commercial areas, saw rentals dipping by 31%, 29% and 25% respectively. The numbers were revealed by Cushman and Wakefield, the global real estate consultants, in their annual year-end report of commercial office space.
According to Arvind Nandan, executive director, Occupier Services, Cushman and Wakefield, the reason why office space demand is lagging behind supply is because the Information Technology/ITES sector that historically accounted for a majority of commercial office space taken up in the country adopted a conservative approach during the slowdown. “Various SEZ projects were deferred, with some developers even undertaking de-notification of their SEZ projects,” said Nandan. “However, with gradual revival in the economy — mostly in the second half of 2010 — demand for office space is likely to increase and, as a result, construction activity is also likely to gain pace in the middle of next year,” he added.
Rentals in Lower Parel are currently in the range of Rs150-Rs 200 a sq ft compared to Rs300 a sq ft in 2008. Rentals in Bandra currently range around Rs100 a sq ft; Worli is over Rs250 a sq ft while Nariman Point is around Rs300 a sq ft.
Mumbai’s recorded absorption (which means commercial office space being utilised) is 5.3 million sq.ft in 2009, was 38% lower than the previous year. Pre-committed absorption constituted at 62% of the total absorption in 2009. During the same time frame, supply increased by 12% to register 10.6 million sq ft. But this supply was 34% below the supply anticipated for 2009 at the beginning of the year. This constrained supply was a reflection of slowdown in demand coupled with falling rental values and liquidity concerns, which forced many developers to reschedule their construction plans, said realty consultants.
According to consultants, total developments of SEZ space in 2010 is estimated to be 12 million sq ft. Majority of the developments are planned in Bangalore, and Hyderabad and account for nearly 68% of the total SEZ space planned. The total supply projection for 2010 is approximately 59 million sq ft but only 46 to 50 million sq ft. is expected to be delivered in the coming year.
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