New Delhi’s Connaught Place fell four notches on the global real estate rankings to settle as the eighth most expensive office location in the world due to a weaker Indian rupee, according to an annual survey by real estate consultant Cushman & Wakefield.

 

The report ranks locations across America, Europe, Asia-Pacific, West Asia and Africa to compare the most expensive office destinations across the world. London’s West End emerged as the world’s most expensive office market, retaining its position ahead of Hong Kong in second place.

 

“Of the top ten markets, only London (+5 per cent) and New York (+17 per cent) have seen a rise in rental values, while most other top ten markets recorded a slowdown in rental values over the previous year. Moscow and New Delhi recorded no change in rental values.  Despite a stronger performance against most of the top markets, Connaught Place fell from fourth position to eighth due to an appreciation in both the US dollar and euro against the Indian rupee in 2013; this caused a shift in New Delhi’s position in terms of global occupancy costs when measured on a dollar or euro basis,” the report highlighted. 

The rupee has declined 12 per cent since January 2013. It had plunged by 20 per cent to its lifetime low of 68.80 in August last year; however, it recovered to 62 levels.

“Connaught Place has witnessed stable rentals at Rs 403 per sq feet per month. Limited activity in the location has led to the rentals remaining stable and may continue at similar levels as the market may have reached its peak rental backed by the still prevalent and positive demand for office space in the area. The location continues to remain high on priority for sectors such as BFSI (banking and financial services industry), consulting, trade and media.  Given that it is one of the oldest established office centers in India and is in proximity to other establishments such as government organisations, trading centres and retail location, demand for quality office space continues,” it added.

 

Sanjay Dutt, Executive Managing Director, South Asia, Cushman & Wakefield, said, “The weakening of the Indian rupee against the dollar/ euro has made office markets in India favourable for international occupiers, while domestic occupies have not seen any significant change in rental values. Connaught Place has remained favourable with office occupiers due to its inherent positives of location and legacy and with limited Grade A supply expected in the near future, the location will continue to command high rentals.

 

“However, going forward, the supremacy of Connaught Place may be challenged with the emergence of newer corporate office locations in Gurgaon, that may provide better alternatives to New Delhi’s CBD (central business district). The trend may be similar to that in Mumbai, where the planned location of BKC and the redevelopment of Lower Parel as new office destinations, have been able to replace Nariman Point in terms of demand for office space,” he said.

 

Rental growth

 

Kolkata CBD recorded the highest rental growth in India at 4.35 per cent in 2013 driven by positive demand from sectors such as BFSI and services/ consulting. With many older office spaces going for renovation to enhance the quality offered, the location has been able to command better rentals owing to this positive trend.

 

Mumbai’s Bandra Kurla Complex (BKC) with rentals of Rs 285 per sq feet per month emerged as the second most expensive office location in India and the eighth most expensive across the Asia-Pacific. The location has remained stable in terms of rental values over the last year due to a large upcoming supply, which is estimated to be approximately 3.3 msf in the next two years. This is also expected to ensure that values remain at their current levels for a few more quarters. Demand for office space in this location has been driven by front office operations of BFSI, consulting, Government and semi-Government organisations. With an increased trend of consolidation, relocation and collocation being observed in the office sector, demand is expect to remain positive albeit at similar rental values.

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