With a 69 per cent increase in occupation costs in the last 12 months, Mumbai's Nariman Point has seen the greatest rent appreciation in CB Richard Ellis survey of prime office space in 173 international markets. In this study, Nariman Point broke into the top 10 most expensive markets.
In the last quarter, rents in Mumbai's central business district (CBD) grew by 31.3 per cent, largely driven by a broad-based demand from tenants varying from banks, securities and head hunters.
When Richard Ellis had conducted a similar survey 10 years ago, it had discovered that Mumbai was the most expensive city in the world for office rents. However, Mumbai's property market is different today, with opportunities existing beyond Nariman Point.
"Mumbai's CBD is in the phase of shifting from Nariman Point towards Bandra-Kurla Complex," said Anshuman Magazine, India head of CB Richard Ellis.
The state-run Mumbai Metropolitan Region Development Authority's auction of plots in the Bandra-Kurla Complex is likely to release one million square feet of built up office space by 2008.
Then, Supreme Court's ruling favouring Mill owners and developers is expected to release approximately 2.5 million square feet of grade-A office space, retail and hospitality in the same time frame.
"While it might be too early to predict correction, the release of this office space will definitely ease off the pressure," said Magazine.
Even in secondary markets such as Worli and Prabhadevi, there continues to be an upward trend of rentals and capital values due to lack of grade-A commercial office space.
For instance, since the first quarter of 2005, there has been a 50 per cent increase in capital values. From Rs 160 per square feet in December 2005, the monthly rental in Worli has risen by 25 per cent to Rs 200 per square feet in March, 2006.
Rentals moving northwards is not restricted to Mumbai alone. There continues to be an upward swing of monthly rentals in New Delhi as supply is not keeping pace with the demand being created by corporates, IT companies and BPOs.
Values in New Delhi are expected to remain buoyant as there will be no substantial supply in the next few quarters.
The first grade office space in Connaught Place has gone up from Rs 90 per square feet in December, 2005 to Rs 120 per square feet in three months. Rentals in South Delhi have appreciated by 50 per cent in the last one year.
Delhi's suburb, Gurgaon, has seen an 8 per cent increase from Rs 35 per square feet from last December to Rs 38 per square feet. Rates have not risen so briskly here as there seems to be more supply.
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