The Hindu Business Line : Commercial rentals on the rise in Mumbai, Bangalore

Mumbai, July 9 Rentals of commercial properties in Mumbai, NCR (national capital region) and Bangalore are set to go up in the calendar year 2007, while it may remain stable or correct lower in Chennai, Hyderabad and Pune, according to a study by international property advisor, Debenhan Tie Leung (DTZ).

Limited supply coupled with increasing demand from IT/ITES, financial services, pharma and telecom companies are escalating rentals.

“Recently, Citibank (Retail Banking) took space in Nariman Point at Rs 550 per sq ft pm (psf pm). However, rentals in off-CBD (Worli, Lower Parel) remain momentarily stable at the ‘peak’ at Rs 250 psf pm achieved in last quarter compared with Bandra-Kurla Complex where rentals have increased by around 15 per cent quarter-on-quarter to Rs 300 psf pm. “With IT/ITES companies setting up base in Navi Mumbai due to availability of talent, rental values in that region have now touched almost Rs 60 psf pm,” said DTZ.

Of the total supply estimated in NCR for 2007, 5.6 msf is expected to come up in Noida. This is far in excess of the projected absorption of 3.3 msf and should see rentals fall or, at best, remain stable.

However, with continued demand and limited fresh supply, rentals in CBD (commercial business district) and SBD (special business district) are expected to continue their upward movement, DTZ said.

Commercial office space

“Delhi NCR has witnessed an overall absorption of 1.9 million sq ft (msf) of commercial office space in the first quarter of the financial year 2007, of which about 65-70 per cent accounts for IT/ITES sector while in Mumbai it was financial services, pharma, telecom and IT/ITES sectors were the key demand drivers together accounting for about 75-85 per cent of absorption of 0.75 msf in the first quarter of 2007,” DTZ said.

Of the total 65.3 msf of commercial space to be added in 2007, NCR tops the list with 16 msf, Chennai to add 15.8 msf, Bangalore 11.8 msf, Kolkata 8.2 msf, Hyderabad 7.1 msf, Mumbai 3.4 msf and Pune 3 msf.

Prominent projects

The prominent projects in Mumbai that will be ready for fitouts in the second quarter of the financial year 2007 are Oberoi Commerce (5.50 lakh sq ft), Titanium 1 (2 lakh sq ft), Kensington (9.60 lakh sq ft). Indiabulls is coming up with a significant supply of 170 lakh sq ft at Jupiter Mills, which will be ready for fitouts by the end of this year.

MMRDA has now increased the FSI in BKC from 1.53 to 4, which is expected to result in additional supply in the market.

In Chennai, the fresh supply of about 15.8 msf in 2007 is far in excess of the estimated absorption of 6.5 msf during the year. Hence, rentals are expected to remain stable or even decline. “However, CBD (commercial business districts) and off-CBD are expected to continue their upward movement with limited supply in the pipeline as they continue to attract a strong demand as traditional business destination,” DTZ said.

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