I cannot help but feel puzzlement at Air India’s sudden decision not to rent out space in what is one of the most valuable real estate assets in the financial capital of Mumbai.
Although challenged by Bandra Kurla Complex, the Central Business District (CBD) of Mumbai comprising of Nariman Point, Churchgate, Cuffe Parade, Fort and Ballard Estate continues to remain the key office market for India Inc. Home to RBI, SBI, LIC, GIC, Bombay Stock Exchange, various national and international banks, the Shipping Corporation of India, McKinsey & Co., legal firms, consultants and corporate houses such as Tata Sons, Reliance Industries Ltd., ADAG etc., Nariman Point commands the maximum rent amongst all other CBD micro markets.
Air India owns collector leasehold rights to the most strategically located and prominent building along Marine Drive. It measures approximately 220,000 square feet, consisting of ground floor plus 22 storeys on collector lease. It can earn upto Rs.80 crores of rentals per annum – a reasonable figure if one calculates as the standard rental rates of Rs.300/sq.ft for this location (this would include net rent after maintenance and property taxes). If monetized for capital value, this building can fetch up to Rs.800 crore.
Most corporate or Government undertakings such as Borosil, Bayer, Hindustan Unilever Ltd., Mafatlal Industries Ltd., National Textile Corporation, Railway Land Development Authority are today conscious of their surpluses (or non-performing assets) and are utilizing them to create rental income to fund expansion, generate sustainable income or retire debt.
The Air India building is definitely a rare and valuable office space asset. Considering the challenges the national carrier is facing, any delay in its efficient use in terms of commercial space utilization is a national loss.
The author, Sanjay Dutt, is CEO – Business, Jones Lang LaSalle India
