Navi Mumbai sees biggest office rentals rise over last 12 months
Within Mumbai, the western suburbs’ micro-market registered a growth of 2.5 percent in average rentals, followed by SBD Central at 2 percent, eastern suburbs at 1 percent, SBD North at 1 percent, and SBD BKC at 1 percent.
National Director – Research, JLL India
In the quarter ending March 31, 2017, the year-on-year (YoY) increase in rentals was the highest in Navi Mumbai at 9 percent. Mumbai’s gross average rents, which include Thane and Navi Mumbai micro-markets, rose by only 1 percent (YoY).
Within Mumbai, the western suburbs’ micro-market registered a growth of 2.5 percent in average rentals, followed by SBD Central at 2 percent, eastern suburbs at 1 percent, SBD North at 1 percent, and SBD BKC at 1 percent. CBD rents continued their downward journey and declined by 4 percent. Thane, however, saw no change.
As ideal locations differ for different occupier categories, some of those wanting to expand may have to prepare for lack of relevant supply at their most preferred locations in the city. While some occupiers may compromise on asset quality and continue to remain in their existing locations, others would be open to moving to ideal locations in the suburbs.
Source: JLL REIS
Then there are push-pull dynamics working in tandem that trigger major movements such as the exodus of corporate and foreign occupiers from the CBD to the SBDs seen in previous years, especially to SBD BKC (often considered as the de-facto CBD of Mumbai) or the ongoing movement of some foreign and domestic occupiers to good-quality assets in suburban locations, which continue to offer a cost arbitrage compared to the established office districts.
Moreover, suburbs prove to be attractive to most employees living in close by or in the extended suburbs. Many back offices have preferred these locations over the years for these very reasons. Recently, foreign and domestic companies – Teva Pharma, Samsung, Deloitte, to name a few – have been setting up not only their back offices in these micro-markets but also their front offices.
With much-needed infrastructure projects like the coastal road and metro rail in the pipeline; suburbs show promise of better connectivity in the medium-to-long term. If relevant supply comes up in these micro-markets, more corporate occupiers may decide to move here. Furthermore, the growing scarcity of carparks in some SBDs and transit woes in SBD BKC may catalyze this movement. Rents may go up in the suburbs, especially, after connectivity improves.Another attraction behind suburban locations, which have evolved from BPO and industrial markets into established back-office districts, is availability of talent. While the western suburbs enjoy close proximity to the airport, the eastern suburbs enjoy proximity to big residential catchments in Thane and Navi Mumbai. While the former have traditionally been considered richer cousins of the two, rentals are higher in eastern suburbs.