Developers in Mumbai hike lease values

By Anumeet Kaur Bisen, CNBC-TV18:

Lack of quality office space in Mumbai continues to push rentals north. And developers are consistently increasing their lease values.

The office space at Lower Parel in Mumbai is set to add another 1.4 million square feet over the next 6-9 months. The project by Indiabulls, which was launched last year is expected to be completed by then. The company is also building 2 lakh square feet of retail development here.

Sources say that while Reliance Capital and India Infoline have taken up 1,60,000 sq ft and 1,50,000 sq ft of office space each, the Aditya Birla Group has absorbed 1,20,000 sq ft of space here. Some other companies are believed to have taken up over 1-lakh square feet in this project, taking the total leased out space to 7 lakh square feet.

Till about a month ago, Indiabulls was leasing out space in this project for less than Rs 300 a square feet a month. But, sources say, the company is now commanding rentals between Rs 350-400 a square feet. 

Other upcoming projects in Lower Parel, like Marathon Next Gen and Piramal Group's Dawn Mills, continue to lease out between Rs 250-300 per square feet per month.

Pawan Swamy, MD-Markets, Jones Lang LaSalle Meghraj said, "Quality developments in this sub-market will always have a premium. And that's what we have seen with the Indiabulls project. It is a project that is a quality development. It is something that most of the end-users and occupiers are seeing value in.”

So is the case with other prime commercial areas in Mumbai, like the Bandra-Kurla complex. Experts say that the lack of supply is hitting the market and holding up rentals.

"I have not really seen too much of the ready supply come up in the market. So, there are developments there that are getting prices as high as Rs 450 a square feet. Being the financial hub of the city, we have seen some large financial institutions take possessions there, even at those prices,” said Pawan Swamy.

So, even though office rentals across the country are on the downside, experts say, rentals for grade 'A', quality office space in Mumbai could jump by another 5-10%, over the next six months.