Realty rates drop in business dist

Mumbai: The light seems to be dimming behind the glass façade of many swanky new office buildings in Mumbai's alternative financial district of Lower Parel.      Office sales and rentals here have fallen by almost a third in two years. The reason is a building boom that took place after various mill land sales 4-5 years ago. In the following period, Lower Parel saw the launch of nine major projects, creating office space of nearly 5 million sq ft.      Two corporate houses, including the Anchor Group, which runs a real estate and a switches business, last week bought over 38,000 sq ft (carpet area) in  Tower B of Peninsula Business Park for about Rs 17,000 per sq ft. The tower is owned by Alok Realtors, the real estate arm of Alok Industries. Also, Tata AIG recently bought about 1 lakh sq ft of office space on three floors in Tower A from Peninsula Land Pvt Ltd for about Rs 16,500 per sq ft. In 2010, the asking rate for office premises in these buildings was over Rs 22,000 per sq ft.      The situation is the same in office rentals. "Developers stuck with inventory are ready to offer big discounts to attract tenants and buyers. Some are even ready to negotiate the deal close to cost price," said a property consultant.      What was available for Rs 275 per sq ft three years ago is now on offer for Rs 150-Rs 175 per sq ft. Developers like Indiabulls Real Estate are negotiating large deals by offering discounts on the going rate of Rs 150 per sq ft for their buildings in Lower Parel. The last major deal at one of the firm's buildings took place at Rs 125 per sq ft a month ago, against Rs 155 per sq ft a year ago. Also, Loreal leased over 50,000 sq ft in Marathon Futurex for about Rs 205 per sq ft.      Property consultants believe prices will continue to remain soft for a year. "Currently, Lower Parel is facing an over supply situation, with above 20% vacancy in 1.5-2million sq ft of ready office space," said Ravi Ahuja, executive director of property consultants Cushman and Wakefield. "It is interesting to note that residential values are 50% higher than commercial values in Lower Parel, suggesting a healthy recovery once supply starts getting absorbed over time. Lower Parel will prove to be an attractive investment in the medium to long term at these values, with demand arising from companies looking to relocate with an objective to rationalize costs."      Key buildings that have major vacancy levels in Lower Parel are Peninsula Business Park A and B, where 83% and 70% space, respectively, are yet to be leased. Marathon Futurex, of which only the first phase is ready, has 92% vacancy, while One Indiabulls and Indiabulls Finance Centre have 15% and 30% vacancy, respectively, as per data from DTZ.