Demand for office space up in Mumbai Rentals Will Be Stable In Near Future: Report

 Indicating an increase in demand for office space, a report by a global property firm has said more than seven million sq ft was leased and sold between April to June this year as compared to five million sq ft between January to March 2012 across the country. The quarterly report by CBRE further said that more than 75% of 2 million sq ft that was absorbed (leased and sold) in the past three months across the country was taken up by companies based in Mumbai, NCR and Bangalore. 

    The increased demand, however, will not have any effect on the property prices in some micro-markets. In Mumbai, oversupply in some micro-markets like Worli, BKC and Prabhadevi, the prices have dropped slightly (See box). 
    "Mumbai should continue to witness an increase in the number of occupier enquiries in the medium and large format space, which are expected to lead to transaction closures over the next few quarters. This is likely to result in an increase in absorption in a short to medium term and balance the market against a large supply pipeline. Rental and capital values are likely to remainstable in the near term,'' said Anshuman Magazine, managing director of CBRE. 
    While Nariman Point witnessed limited transaction activity, Lower Parel saw only 80,000 sq ft being absorbed of the total 1.1 million sq ft of Grade A office space that was available. "The demand-supply gap in Lower Parel has increased vacancy to an estimated 34-35% in the past three months, compared to 24-25% in the first three months of 2012,'' said CBRE. 
    A similar view was expressed by Cushman and Wakefield, a global property consultant. In their office report, Cushman said Mumbai registered the second highest demand for office space in the first half of 2012 mainly from the banking and financial sector. "Of 2.78 million sq ft absorbed, the banking and financial sector absorbed 23% of this space. Most of this space is located in Andheri, Lower Parel and Bandra Kurla Complex. The supply on the other hand, was 3.6 million sq ft. Due to the balanced supply and absorption dynamics, the vacancy level dropped marginally to 17.3% at the end of the second quarter keeping the rental stable across all the micro markets,'' Cushman said in their report.