Mumbai, the world’s fourth most expensive office market, will add a third of India’s total office space supply in 2011-12, said a recent study.
Despite high vacancies and a stock of 47 million sq ft in office properties, Mumbai is expected to add 17-18 million sq ft in office space till mid 2012, as its main business districts are seeing a revival in rentals, global property consultant CB Richard Ellis said in a report.
Last year, office rents in both Nariman Point and Bandra Kurla Complex, Mumbai’s key business areas, came down by 40 per cent from their peak, as corporates and financial institutions deferred leasing office spaces.
Overall, India added approximately 55 million sq ft of office space in 2010 and is expected to add another 50 million sq ft in 2011-12, CBRE said. However, only 32 million sq ft of office space would be absorbed in 2010, CBRE said.
“The overall real estate performance of the country has been on an upward trend, with increasing transaction volumes. This is due to sustained IT industry activity, impact of economic recovery on new economy sectors, global optimism on corporate expansion, consumer confidence and a rise in income levels,” said Anshuman Magazine, Chairman and Managing Director, CB Richard Ellis South Asia.
The residential segment might, however, witness reduced absorption due to significant price increase in prime metro micro markets, large supply and an increase in mortgage rates, Magazine said.
While Mumbai will lead the Indian office supply market with 27 per cent share in 2011-12, Bangalore and NCR would follow at 19 per cent and 17 per cent, respectively.
The report says rents will increase in Nariman Point and Bandra Kurla Complex in the coming year due to demand for office spaces in prime areas. But locations such as Worli, Lower Parel and Parel in central Mumbai and suburbs such as Malad, Thane, Powai and Navi Mumbai are expected to see marginal increase or stability in rents, due to large supply and higher vacancies.
On the retail front, the report states, 80-90 malls are lined up to get operational in the next two years. The consultant estimated that around 200 malls are operational in the country.
“Retailers/tenants will continue to hold sway in certain oversupplied locations, pressing developers for revenue share and related incentives,” it said.
The NCR, Pune and Bangalore are leading the retail supply in 2011 with a share of 24 per cent each, the report said. Mumbai will have a share of 21 per cent.