The Hindu Business Line : Mumbai world’s sixth most expensive office market

New Delhi, June 4 India’s financial hub, Mumbai, has dropped to the sixth position in real estate consultant CB Richard Ellis’ list of most expensive global office markets, as demand contraction triggered a fall in rentals.

CBRE’s last global report in November 2008 had placed Mumbai fifth in the pecking order. Delhi, however, bettered its previous ranking ending-up a slot higher this time at 12 place.

A change in order was also seen at the top. Tokyo’s Inner Central District supplanted London’s West End to become the world’s most expensive office market. According to the semi-annual Global Office Occupancy Costs survey, London’s West End is now the world’s second most expensive office market, followed by Moscow, Hong Kong’s Central Business District or CBD, and Tokyo’s Outer Central District. The report, tracks office occupancy costs in more than 170 cities, globally.

Fall in demand

“The ranking highlights the decrease in rentals we have witnessed in the last six months due to a reduction in demand. However, Mumbai continuing to be in the top 10 and Delhi being at 12th place reflects the shortage of prime office supply in India,” Mr Anshuman Magazine, Chairman & Managing Director, CB Richard Ellis South Asia, said. He further said that reduction of office occupancy costs and higher supply of office space would require an urgent improvement in infrastructure and amenities.

“This would bring our world rankings down further and make India more competitive,” he said.

Financial centres have been most significantly affected by declining occupier demand and on expected lines have registered the most material decrease in office rents.

"In many cases, major global office markets have seen occupancy costs fall by over 20 per cent over the last 12 months. Across the 170 cities as a whole, office occupancy costs fell 2.8 per cent over the 12-month period ended March 31, 2009 (on an un-weighted average basis) compared with an increase of 8 per cent in the 12-month period ended September 30, 2008. Singapore had the largest year over year decrease in occupancy costs with a drop of 34 per cent.

In contrast, a few markets - such as Charlotte (US), Marseille (France) and Perth (Australia) - recorded an increase in costs over the last 12 months but they were more an exception rather than the rule. "Generally, these increases are either due to exceptional local market conditions, such as the completion of a top quality new building in a market where none was available previously, or simply that occupancy costs remain above the level of a year-ago period despite the fact that they are now falling. Such situations illustrate the uneven way in which the economic downturn is affecting different markets around the globe," said the report.

"The great global recession has clearly taken its toll on the world's office markets, particularly those with significant concentrations of financial industry employers. The most expensive office markets, as measured in dollars, are considerably less expensive than a year ago and occupiers are now in a strong position to procure prime space at attractive costs. For instance, a year ago office space in London's West end was nearly $300 per sq. ft., while today that space goes for $172 per sq. ft." said Dr Raymond Torto, CBRE's Global Chief Economist.

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