In May, UK-based banking major Barclays leased 180,000 square feet of space at Nirlon Knowledge Park in Goregaon area of Mumbai for its back end operations. The deal was stuck at a monthly rent of about Rs 1.8 crore or Rs 95 per sq ft per month.
By doing so, Barclays joined the club of other multinationals such as Deutsche Bank, Morgan Stanley, Citigroup and others who have back offices in the IT Park promoted by BSE listed Nirlon Ltd.
In fact, German banking major Deutsche Bank also moved its back offices to Nirlon a couple of years ago from Peninsula Corporate Park in Lower Parel to Nirlon. Currently, Deutsche houses four of its offices in Nirlon.
The rush is palpable. Office complexes such as Nirlon, Lighthall-B, Nesco IT Park among others have benefitted the most from the record absorption that has taken place in the Andheri-Goregaon belt in the current year.
Out of the 1.35 million sq feet absorption that has taken place in Andheri-Goregaon business district in the first six months of this year, the three projects have seen nearly half of the total offtake in the area, according to realty consultant.
Andheri-Goregaon saw 1.3 to 1.4 milion square feet of office spaces being absorbed every year between 2010 and 2012, according to realty consultant Cushman & Wakefield. This was the highest among the city’s business districts such as Nariman Point, Bandra Kurla Complex and others. The only exception was the year 2012, when absorption in Lower Parel-Worli was at 1.75 million sq ft.
Consultants say Andheri-Goregaon is also likely to beat others in office absorption this year too given that the business district has done about 1.3 million sq ft of absorption.
The major beneficiaries of the absorption in Lower Parel and Worli in 2012 were Indiabulls Finance Centre and Indiabulls One Centre which saw a combined absorption of 600,000 sq ft and Peninsula Business Park in Lower Parel which saw similar absorption last year.
Nirlon, which was built on a factory land owned by textile and conveyor belts maker, spread over a 23 acre plot and has total constructed space of 1.6 million sq ft in phase I and II. Nirlon is building another 0.5 million sq ft and 0.7 million sq ft in phase III and IV respectively.
Lighthall B is a joint venture project between Ekta Kapoor’s Balaji and Hiranandani Constructions and has two towers of 0.7 million sq ft. Hiranandani and Balaji honchos could not be contacted for comments.
Nesco looks to lease 350,000 square feet of office space this year, said Sushil Shah, vice president, strategy, at Nesco Ltd, which is primarily into capital goods.
Nesco has 0.8 million sq ft of space in phase I, which is completed, and the company is building 1.4 million sq ft and 1.8 million sq ft of additional buildings in the projects in phase II and III respectively.
Although Nesco’s Shah refused to share the name of clients citing confidentiality pacts, consultants say UK banking major HSBC and consulting and auditing major KPMG signed lease deals in the project.
Comparatively lower lease rents, better space efficiencies, close proximity to railway stations, highways and residential hubs are among the reasons why tenants opt for these complexes.
Consultants say, Nirlon and Nesco charge between Rs 85 and Rs 95 per sq ft to IT and ITES clients and between Rs 95 and Rs 110 for tenants from other sectors. The reason for the difference is that property taxes at IT complexes are Rs 8 to 10 lower than at other office projects .
“There is a good demand for IT parks in these areas because of rents and proximity to residential hubs. IT cannot go to Nariman Point and Lower Parel where rents hover between Rs 150 and Rs 250 a sq ft,” said Sanjay Dutt, managing director, South Asia at Cushman & Wakefield.
While A-grade buildings at Nariman Point, the central business district, command rentals of Rs 275 per sq ft, those in Worli get around Rs 240, in Lower Parel around Rs 140-150 and Bandra-Kurla Rs 280 per sq ft.
The other attraction is higher built-up-to-carpet-area ratio which means tenants get to use higher space for use compared to what they actually leased. Consultants say this ratio is 75 to 80 per cent in Andheri –Goregaon buildings, versus 60 per cent in Lower Parel or Worli buildings.
“If a firm moves from Lower Parel to suburbs like Goregaon, it can save at least Rs 40-60 per sq ft every month. That translates into significant savings for it over a nine-year period,” says Raja Seetharaman, managing director, Aperon Realty, a property consultant.
Proximity of Nirlon and Nesco IT parks to Western Express Highway and suburban railway stations have also helped the complexes to attract tenants, consultants and companies said.
According to Nirlon’s annual report, it earned licence fees of Rs 8.46 crore per month as on March 31, 2012, and additional fee of Rs 1.32 crore per month from exiting old buildings in NIRLON. Earlier, the company management said it was expecting income of around Rs 80 crore from NIRLON from FY 2013.
Nesco earned income of Rs 26.71 crore in FY 2012 as compared to Rs 33.73 crore from its IT park due to slowdown in global and Indian economies, the company said in the FY 2012 annual report.