Mumbai: Grade A Office
Demand
Mumbai witnessed the highest absorption in the year in 4Q10 which was recorded at 1,328,582 sq ft (123,429 sqm) indicating robust demand. Demand for Grade A office space was broad-based and not restricted to the banking, financial services and insurance (BFSI) sectors, which typically dominate Mumbai’s tenant landscape. Domestic and multinational occupiers from the consulting, aviation, IT/ITES and other industries were active in acquiring front-office and back-office space in 4Q10. Domestic firms, in particular, continued to display increasing propensity towards the outright purchasing of office space as opposed to leasing.
Key transactions in Mumbai during 4Q10 include the following:
- Yes Bank leasing 100,000 sq ft (9,290 sqm) in Indiabulls Finance Center, SBD Central;
- JSW Group purchasing 300,000 sq ft (27,871 sqm) in Orbit WTC, SBD BKC;
- 3G leasing 156,000 sq ft (14,493 sqm) in Infinity Towers, Suburbs;
- Tata Motors Finance purchasing 43,245 sq ft (4,018 sqm) in Lodha iThink (Thane), Suburbs; and
- India Infoline purchasing 125,000 sq ft (11,612 sqm) at Sun Infotech Park, Suburbs.
Supply
Seven buildings in Mumbai’s prime micro-markets were completed during 4Q10, adding about 2.39 million sq ft (221,760 sqm) of office space. At end-4Q10, the total operational stock in Mumbai’s prime micro-markets stood at 39.1 million sq ft (3.63 million sqm), with an overall vacancy level of 11.5%.
The major completions in Mumbai during 4Q10 were Boomerang (A and B Wings), which has a built-up area of 1 million sq ft (92,903 sqm), located in Andheri and developed by Kanakia Spaces, Crescenzo (lower floors), which has a built-up area of 577,000 sq ft (53,605 sqm), located in BKC and developed by Parinee Developers and The Qube, which has a built-up area of 267,000 sq ft (24,805 sqm), located in Andheri and developed by Indrajeet Infrastructure.
Asset Performance
Unlike in 3Q10, when only the premium micro-markets of the CBD and SBD BKC showed a marginal increase in rental values, 4Q10 saw the majority of Mumbai’s micro-markets, including SBD North and pockets of the Suburbs, recording a positive movement in rents (2.9–3.4%). The market yield across these precincts remained in the range of 9.8–11.2%.
12-Month Outlook
Rental rates in Mumbai have already started to show signs of recovery, notably in the CBD and SBD BKC micro-markets. As the Indian economy gains further momentum and current asset prices are at 43% lower than their recorded peak values during 3Q08, they will continue to fuel demand in Mumbai. In 2011, rents and capital values across Mumbai’s prime micro-markets are expected to rise marginally, although at varying levels, owing to the disparate supply pipelines of each of the precincts.
Mumbai: Prime Retail
Demand
Demand for retail properties in Mumbai continued to increase in 4Q10. Select operational malls in the suburban precinct witnessed significant absorption while some others under construction recorded healthy pre-leasing during the quarter. A total net absorption of 375,461 sq ft (34,882 sqm) was recorded in 4Q10 compared to 314,403 sq ft (29,209 sqm) in the previous quarter. Consequently, the year-end net absorption for 2010 reached 1.3 million sq ft (119,888 sqm) as compared to 0.8 million sq ft (75,624 sqm) in 2009.
Major leasing transactions during the fourth quarter, included the following:
- Fab India leasing 1,921 sq ft ( 178 sqm) in Infiniti Mall, Malad, Suburbs;
- Rhysetta leasing 907 sq ft (84 sqm) in Infiniti Mall, Malad, Suburbs; and
- Esbeda leasing 1,237 sq ft (114 sqm) in Infiniti Mall, Malad, Suburbs.
Supply
Mumbai witnessed the completion of a mall named Glomax at Kharghar in the Suburban micro-market. This new completion contributed an additional 325,000 sq ft (30,194 sqm) of operational mall space to the total retail stock of the city. The vacancy in the Prime South and Prime North micro-markets respectively declined to 6.6% and 17.3% in 4Q10 from 6.8% and 17.5% in the previous quarter. Despite the new additional mall space of 325,000 sq ft (30,194 sqm), the Suburban micro-market’s vacancy went down to 26.8% in 4Q10 compared to 28.2% in 3Q10. The vacancy in the Suburban micro-market declined due to the substantial increase in net absorption in 4Q10. At end-4Q10, the city’s total operational retail stock reached 13.63 million sq ft (1.26 million sqm), with an average vacancy of 23.2%.
Asset Performance
Rental values across the micro-markets of Mumbai remained stable in 4Q10. However, the capital values in Prime South have started going through an upturn due to the constrained future supply of mall space in this precinct. The Prime South and Prime North micro-markets recorded an average rent of INR 225 per sq ft per month and INR 135 per sq ft per month, respectively; whereas the Suburban micro-market recorded an average rent of INR 85 per sq ft per month in 4Q10.
12-Month Outlook
Mumbai is expected to have about 4.8 million sq ft (448,258 sqm) of new operational mall space by end-2011. With the limited future supply in the Prime micro-markets, rent is expected to rise in the next one to two quarters. The average rent for the Suburban precinct is expected to remain under pressure for the next two to three quarters due to the large future supply in the pipeline. However, select upcoming malls by reputed developers with good catchments in the Suburban precinct have already witnessed an appreciation in rental value at end-2010.
