Property prices of prime office locations in Mumbai are projected to increase by 5-10 per cent in 2012, according to a new report by real estate consultant firm Jones Lang LaSalle.

In its new report, “Global Market Perspective – Second Quarter 2012”, the consultant firm has estimated that direct commercial real estate investments across the country have risen by 93 per cent year-on-year as of the end of the first quarter of the calendar year.

The 5.1 per cent increase in prime office rents on an annual basis vis-à-vis the corresponding period a year ago was reflected in an increased vacancy rate of 16.5 per cent in the metro city.

Notional capital value

The notional capital value of properties is estimated to have risen by 6.7 per cent on an annual basis at the end of March 2012, according to the consultant firm, which also stated that the indicative yield on prime/Grade-A office spaces rose by 10.2 per cent.

This would translate into a 159 basis points gap between the yield offered by investment in commercial properties vis-à-vis the 10-year government bond yields, the agency said.

It has also predicted that 33.7 per cent of office projects in Mumbai as a percentage of the total stock in hand of realty firms, will be completed during the year.

The report also contains bad news for tenants: the firm has projected that while the commercial property market conditions in Mumbai will continue to remain neutral for those hiring and those leasing out property in 2012 and 2013, the situation will swing in favour of landlords in 2014, translating into higher rents.

(This article was published on July 21, 2012)
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