Mumbai falls from the global top 10 office market: C & W

CUSHMAN & WAKEFIELD

Mumbai's CBD (Nariman Point) - drops-to 15th most expensive CBD office location from its previous 8th position according to the annual report Office Space Across the World 2012 by Cushman & Wakefield, leading global property consultants. This is also the first time in over 6 years; Mumbai fell out of the top 10 rent rankings. Mumbai. Hong Kong, London and Tokyo maintained their top position as the top three respectively on the annual chart. Beijing (5) and Sydney (7) came into the top ten for the first time in 2012.

The world's most expensive CBD office locations

Rank 2011	Rank 2012	Location	Occupancy Cost (€/sq.m/year)(dec2011)	Occupancy Cost US$/sq.ft/year(dec2011)	Rental growth/ decline (%)
1	1	Hong Kong	2026	244	+1
2	2	London (West End)	1978	239	+8
3	3	Tokyo	1635	197	+7
7	4	Moscow	1223	148	+41
13	5	Beijing	1082	130	+75
5	6	New York (Midtown)	992	120	+4
6	7	Sydney	987	119	+6
4	8	Rio de Janeiro	904	109	-8
9	9	Paris	875	106	+5
10	10	Zurich	809	98	-3
8	15	Mumbai (CBD)	626	73.3	-8%

 

 

 

 

 

Source: Cushman & Wakefield

Ravi Ahuja, Executive Director, Cushman & Wakefield, India, "The decline of Mumbai's CBD rentals is reflective of two very important aspects; firstly, that other micro markets across Mumbai are witnessing a growth vis-a-vis the CBD. Secondly, that there is a certain amount of rationalisation in rentals in locations that had seen unprecedented rise in peak periods of 2007 - 08. Nariman Point has seen a steady and perhaps planned decline in the last few years as other micro markets like BKC and Lower Parel recorded a corresponding rise. BKC was consciously planned to decongest the CBD over a period of time and we see this phenomenon setting in."

Nariman Point saw a rental decline of approximately 8% in 2011 allowing the location to slip in global ranking, largely due to diminishing interest from occupiers on account of higher prices, lower quality and age of construction and growing distances from residential hubs. In contrast to this, locations like Bandra - Kurla Complex (BKC), Worli - Lower Parel and Andheri - Kurla Road offer larger floor plate and higher quality of construction whilst being closer to residential hubs. BKC has been inching upwards in terms of rental values (6%) owing to a steady demand from sectors such as BFSI, Consulting and other sectors. While locations of Andheri - Kurla etc. and other western suburbs are catering to the requirements of back office operations.

TOP TEN MOST EXPENSIVE LOCATIONS IN INDIA

Rank	City	Micro Market	RENTAL VALUES (INR / SQ. FT./ MONTH)		% Change in 1 year
			Dec 2011	Dec 2010
1	Mumbai	Bandra - Kurla	275	260	5.7
2	Mumbai	Nariman Point	275	300	-8.3
3	Mumbai	Worli	260	275	-5.5
4	NCR	CBD-Prime	257	250	2.9
5	Mumbai	Lower Parel	170	185	-8.1
6	NCR	CBD-Others	162	161	0.5
7	NCR	South Delhi-Micromarkets	150	151	-0.6
8	NCR	South Delhi-Prime	148	144	2.7
9	Kolkata	Park Street/ Camac Street	122	103	18.4
10	Mumbai	Mumbai	115	120	-4.2

Source: Cushman & Wakefield Research

Ravi further added, "The trend of shift in focus from the CBD to other locations is also visible in the prime office markets in NCR and Bangalore where , suburban and peripheral locations are witnessing a rise in activities. Not only do these locations have a cost advantage over traditional locations, they are able to offer greater value in terms of social and civic infrastructure and also good talent pool from the vicinity. Thus we are likely to see this phenomenon continue for another few quarters."

Beating expectations of most, Kolkata saw a striking growth rate in rental values in 2011 making it one of the fastest growing office markets in Asia. Kolkata's Rash Behari Connector (Ruby) saw the highest rental values appreciation of 28.1% over last year. Three other locations including Park Circus Connector (26.1%), Dalhousie Square (24%) and Park Street/ Camac Street (18.4%) also recorded high growth in rental values. This was largely due to the fact that quality office space supply is scarce in these locations thus the limited available Grade 'A' supply has started to command a premium over others.

FASTEST GROWING OFFICE LOCATIONS ACROSS INDIA

Rank	City	Micro Market	RENTAL VALUES (INR / SQ. FT./ MONTH)		% Change in 1 year
			Dec 2011	Dec 2010
1	Kolkata	Rash Behari Connector (Ruby)	73	57	28.1
2	Kolkata	Park Circus Connector (Tapsia)	76	60	26.7
3	Kolkata	Dalhousie Square	62	50	24.0
4	Hyderabad	Suburban	38	32	18.8
5	Kolkata	Park Street/ Camac Street	122	103	18.4
6	Bangalore	Suburban	58	52	11.5
7	Bangalore	Peripheral 3	49	44	11.4
8	Pune	Sholapur Road	30	27	11.1
9	Chennai	Off CBD-T.Nagar, Alwarpet (IT/ITeS)	55	50	10.0
10	Chennai	Suburban- Ambattur	23	21	9.5
11	Pune	Off. CBD S.B.Road and Wakdewadi	70	64	9.4
12	Chennai	CBD-Anna Salai, RK Salai (IT/ITeS)	60	55	9.1
13	Chennai	Off CBD-T.Nagar, Alwarpet (Corporate)	60	55	9.1
14	Chennai	CBD-Anna Salai, RK Salai (Corporate)	65	60	8.3
15	Mumbai	Bandra-Kurla Complex	280	260	7.7

Source: Cushman & Wakefield Research

Bangalore, nicknamed as the Silicon Valley of India, while registered rental growths in the range of 3% -11%, remained outside of the top positions of the survey. Driven almost entirely by the IT/ITeS industry, the majority of the leasing activities have been in peripheral and suburban locations which have seen a corresponding increase in values.  CBD / Off CBD in Bangalore provide for smaller office spaces which have seen a growth of approximately 6% largely backed by other sectors like BFSI, consulting, media amongst others. There has been a noted decline in supply in the city, while absorption has been buoyant, which has ensured that the vacancy has remained at a low 13% in the end of 2011.

Chennai on the other hand a good year for Office Spaces rentals with most of its location recording growth in rental values ranging between 7% - 9% over the previous year. This was on account of the market seeing some robust activities in the first half of 2011. Chennai provides for a distinct advantage as against others of having quality supply whist remaining cost effective.

NCR markets remained one of India's top ten office space destination but with marginal increase to the rental values. The demand was largely skewed towards IT SEZ space which also showed a resultant increase in rentals by approximately 4% over the previous year. Much like other cities, corporate houses are showing preference for newer office space locations that offer more modern amenities.

Asia-Pacific recorded the steepest regional prime office rental increases in 2011 according to Cushman & Wakefield's Office Space across the World 2012 report. Overall, rents across the region increased by an average of 8%, with Beijing recording the highest jump in rents globally (75%). Hong Kong maintained its position as the most expensive office location in the world for the second year running, with Tokyo in third.

Sigrid Zialcita, Managing Director for Cushman & Wakefield's Research team in Asia Pacific stated: "Steady improvement in property fundamentals has sustained solid rent growth in most markets within Asia Pacific.  While signs of cooling were certainly evident in the second half of 2011, broad-based regional economic growth of 5.9% fuelled leasing activity largely driven by IT and banking sector. Rents, however, maintained their downtrend in supply-heavy markets such as Seoul, Hanoi, Ho Chi Minh, and Mumbai."

Office Space across the World, one of Cushman & Wakefield's longest-running global publications, examines total occupancy costs for prime space in 68 countries. Markets are ranked in each country, and the most expensive markets in each country are further ranked vis-à-vis those around the world.

Note

• The sample used for deriving occupancy cost estimates were based on new prime centre, high specification units of a standard size commensurate with demand in each CBD location. Therefore, we are comparing prime space in each market covered in our global survey.
• Total Annual Occupancy Cost = Gross rent (Base Rent + Service Charge + Taxes) x Annual Frequency x Sq. Meters Conversion x Survey Exchange Rate x Net Internal adjustment
• The Net Internal Areas figures have been calculated by standardizing the floor space measurements on which the quoted rent is based.  Cushman & Wakefield Asia quote all rents on a net usable area and quote effective rents, which takes into account rent free period or capital contributions where appropriate, security deposits are not included.

About Cushman & Wakefield

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