Office Rents Skyrocket In Mumbai, Singapore
Ruth David, 11.21.07, 11:55 PM ET
Office rents in London and Mumbai are the highest in the world, while rents in Singapore grew the fastest in 2007, as demand from global companies looking at ramping up in the region up pushed up prices, according to a survey by CB Richard Ellis.
London's West End neighborhood topped the commercial real estate broker’s list of most expensive areas for office space at $328.91 per square foot. Mumbai came in second at $189.51 per square foot, up 55% from the previous year. The report looks at rental rates as of Sept. 30.
In Mumbai, office rents were elevated by strong demand from IT businesses and, to an extent, the financial sector.
Office rents in Singapore increased 82.6% to about $102.37 per square foot. The city ranked 11th on CB Richard Ellis’ list of the 50 most expensive cities for commercial space.
Following London and Mumbai, the other top cities are Moscow, Tokyo, Paris, New Delhi, Hong Kong, Singapore and New York.
The results are skewed by the fact that the results of the survey are expressed in dollar terms, and the U.S. dollar has lost value against most international currencies. Over the past year, rents expressed in dollar terms have risen by up to 15% in the rest of the world simply due to exchange rate movements, the report said.
Within Asia, major office markets were robust, with strong demand from multinationals and vacancy rates at a tight 5% or less in the key financial centers of Tokyo, Singapore, Hong Kong and Shanghai.
Within the five financial districts of Mumbai demand far outstrips supply, said Sanjeet D. Narain, managing director at the property consultancy Narains. The district with the least supply is Nariman Point in south Mumbai. In the Bandra Kurla Complex in the Mumbai suburbs, rates per square foot have almost doubled since last November.
Narains, which deals mainly with foreign firms, said demand rose 70% over the last year. Mumbai’s commercial real estate market is expected to get an additional 3 million square feet in office space over the next 12 to 18 months, and after that prices may correct, he said.
“In Mumbai, the banks and private equity players who came in over the last several months have driven rentals up. Mainly because they want offices in the heart of the city, where there’s barely any supply coming in,” said Anshuman Magazine, chairman and managing director of CB Richard Ellis South Asia.
“In Delhi, there’s literally zero supply, so whatever little demand there is drives prices up,” he said. Services companies—ranging from consultants to tech firms to banks—are the companies generating demand in the region. Domestic companies may balk at paying the high rentals, or already have bases in the city, so they aren’t contributing as much to the increase in demand.