Further Decline in Office Space Rentals at Nariman Point

Published: January 19, 2010

The micro-market of Nariman Point was among the few in the country where office space rentals fell over the last quarter in an otherwise stabilising commercial real estate market. According to a report by commercial real estate services firm CB Richard Ellis, this is primarily due to relocation of offices from Nariman Point to further north of Mumbai. Rentals of grade A offices in the Central Business District (CBD) of Nariman Point, Fort and Cuffe Parade fell from Rs 300/sq ft to Rs 290/sq ft a month while those in grade B offices fell from Rs 225/sq ft to Rs 210/sq ft a month. The overall rentals in the area decreased by three per cent over the last three months of 2009. “The Central Business District (CBD) of Nariman Point continued to witness pressure on absorption on account of tenants relocating or evaluating potential relocation to the Extended and Alternate Business Districts,” the report says.

Some of the major offices that have recently vacated more than 1 lakh sq ft of office space in Nariman Point include JP Morgan that has shifted to Kalina and Hindustan Unilever that has moved to Andheri. As a result, grade A office space in Nariman Point, which had a high vacancy rate of 10 per cent in September last year, has now registered a higher vacancy rate of 18 per cent.

In contrast, the report points out, the Alternate Business District (ABD) of Bandra Kurla Complex and Kalina witnessed absorption of 78,000 sq ft over the last three months alone, leading to a six per cent increase in rentals. Also, several ‘cost-conscious’ companies have moved to the secondary business district of Andheri, Vile Parle, Jogeshwari while the peripheral business district of Powai and Goregaon witnessed an increase in demand for back office space. Anshuman Magazine, chairman and managing director of CB Richard Ellis, South Asia, said, “Since the third quarter of 2009, the office segment has seen some movement with corporates slowly returning to the market and office space take-up improving.” In 2010, the demand is expected to improve though the rentals will remain the same in the near future owing to the large supply of office space, according to Magazine.

Source: Indian Realty News

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