Corporates occupying office space in premium business districts of Mumbai are either shifting offices to cheaper locations or re-negotiating rates with the existing owner. Renegotiation is leading to 20 per cent lower rental values.
Sanjeet D Narain, Managing Director, Narains Corp, a Mumbai-based property consultant and realtor firm says, “Quite a number of companies are shifting offices. Leases agreed upon three to five years ago are coming up for renewal. In a number of cases, the current occupant is either re-negotiating rates or is moving to cheaper locations”.
Narain adds that the Bandra Kurla Complex or BKC is witnessing this trend in a big way. Corporates are shifting from areas like BKC to Andheri (East), Vikhroli and LBS Marg. “Those who are able to re-negotiate are getting new rent leases at BKC for Rs 270-350 per sq ft per month against the earlier range of Rs 350-500 per sq ft. The people moving to Andheri are paying rental values of Rs 100-125 per sq ft while at Vikhroli it is even cheaper at Rs 80-110 per sq ft”, says Narain.
German automobile maker Volkswagen has reportedly decided to shift its India headquarter from the city’s BKC Complex to Andheri .
The Central Business District of Mumbai continued to witness subdued demand from corporates for their office space requirements. “A meager 10,000 sq ft of absorption was witnessed in the micro markets of Nariman Point, Fort and Cuffe Parade during the Jan-Mar 2013 quarter. Rental values continued their downward trend and have declined by 3-4 per cent quarter-on-quarter”, a recent report of CBRE said.
Data with Magicbricks.com also shows that the rental price of commercial properties in over 90 per cent of the areas tracked in Mumbai experienced a decline in the Jan-Mar 2013 quarter. Capital values also slipped in areas like Nariman Point, BKC, Borivali East and Chembur.
Reflecting the economic sentiments of the country, both office leasing activity and rental values are on a decline in most cities of India, including Mumbai. India’s gross domestic product or GDP grew by 4.5 per cent in the Oct-Dec 2012 quarter compared to 6 per cent growth in the same quarter of 2011. This was the slowest GDP growth in a decade. The office space lease and hiring activity may have to wait for an improvement in macro-economy to see better days.