MUMBAI: Amid uncertain global economic sentiments and rising borrowing costs, there is some good news for tenants looking to lease office space in Mumbai.
Probably for the first time in Mumbai’s commercial property market, there are no takers for nearly 1.1 million sq ft, or 11 lakh sq ft of ready office space-the highest level of vacancy in the city. The high vacancy in turn, has put pressure on commercial rental rates which now touch 2006 levels, say property consultants.
“This is the highest quantum of office space lying vacant in the city,” says Ramesh Nair, managing director (west) of Jones Lang Lasalle, global property consultants.
According to Nair, while uncertain economic conditions have companies shying away from leasing space, another reason is the oversupply. “In a bid to maximize use of the existing land area, developers rushed to avail the incentive floor space index given by authorities under various schemes like information technology parks.
With the result that there is a huge amount of space lying vacant and this, in turn, has put pressure on rental rates which is now equal to 2006 levels,” said Nair. Till 2006, the total stock of Grade-A office space was 29 million sq ft.
While the average vacancy across the city is 20.5%, it varied in individual business districts. Nariman Point has a vacancy of 10%, Lower Parel, Worli, Andheri, Borivli and Vikhroli have 24% vacancy, Bandra-Kurla Complex has 16% and the Thane-Belapur region has 28% vacancy.
According to property consultants, though rentals are under pressure, many property developers, who are under financial stress, are increasingly opting to selling their office space.
“But, developers are selective in selling their office properties. If they have 100% ownership, they will sell 40% and keep the 60% with them; otherwise they will lose control of the building. Even if they sell half of their buildings, some clients may not like that. So they are balancing all of that,” said the chairman of a leading consultancy firm.
Ackruti City, the Mumbai-based property developer, is selling offices in three of its properties-Ackruti Star, Ackruti Viva and Ackruti Solaris in Andheri through a discounted deferred payment scheme.
Wadhwa group, one of the largest unlisted realty companies in Mumbai, has lowered its rental rate as well as selling floors in its soon-to-be finished ‘The Capital’ project in the Bandra-Kurla Complex.
Source- http://economictimes.indiatimes.com/markets/real-estate/news-/no-takers-for-11-lakh-sq-ft-office-space-in-mumbais-property-market/articleshow/13287298.cms