India's financial capital and largest urban agglomeration, the country's biggest income tax-generating city and location of its costliest real estate, home to India's corporate world and Bollywood, fashion capital, media and entertainment centre, Gateway to India!
It is also India's largest office market, with 7.82 million sqm of Grade A office space, 5.93 million sqm of which is occupied, as of December 2012. By contrast, two of India's other large office markets, Bangalore and NCR-Delhi, each have a total stock of Grade A office space of 6.31 and 5.78 million sqm respectively. With 3.11 million sqm of office space currently under construction, by 2015, Mumbai will be the first Indian city to join a handful of cities worldwide that have 10 million sqm of office space (crossing over 100 million sq ft in 2014), which is no mean feat!
Over the years, Mumbai's office market has grown in terms of both the densification of existing business districts and the emergence of new ones. The city's historic Central Business District (CBD) was largely saturated with 0.53 million sqm of office space. The Bandra Kurla Complex then took over as the new CBD, with 0.74 million sqm of space. With South Central Mumbai’s 1.0 million sqm of space, the island city now offers 2.27 million sqm or about 30% of Mumbai's total office space.
Co-relation Between Occupants' Businesses and Choice Of Office Location
The Banking, Financial Services and Insurance (BFSI) sector is historically the most dominant occupant of space in Mumbai, taking up between 21% and 52% of the total from 2007-12. The supremacy of this sector has been overshadowed by the IT Services sector in the past three years as this new sector emerged as a powerful occupant.
Three other sectors, namely Healthcare, Professional Services and Transportation Warehousing, have also taken up space steadily, completing the group of the top five occupants. It is interesting to note that various sectors prefer specific submarkets and that they drive the demand-rent dynamics on their respective "home turf". BFSI companies remain partial to the CBD-South, the SBD-BKC and the SBD-Central districts, all of which are functionally island city areas, as their higher affordability matches the higher rents asked in these prime districts.
IT Services, a highly cost-sensitive industry, remains concentrated in suburban districts, while Healthcare has spread itself evenly between prime and suburban locations, and Professional Services companies have consolidated their offices in SBD-Central, taking advantage of lower rents caused by oversupply. Transportation-Warehousing companies have made suburban districts their home, as is the case with the Consumer Goods & Services, Media & Entertainment, Manufacturing and Real Estate & Construction sectors.
Time to Recognise the Role of IT Services Companies
Vision and Facilitation From City Authorities and Developers
Another contributing factor to Mumbai's improving performance in leasing office space to this sector was an arrangement by which occupiers were able to merge their front and back office functions in an IT-designated office block, creating a win-win situation for tenants and landlords. Under this arrangement, office blocks could be constructed in the IT building category and were awarded Floor Area Ratio incentives by city agencies that enabled landlords to construct twice the area otherwise permitted. Landlords could thus pass on the benefits gained by reducing their asking rents and the corporate world responded by leasing large spaces.
Following the Rise of IT Services Making Mumbai The Most Diversified Office Market
Mumbai's dominant BFSI sector, along with strong Professional Services and Media & Entertainment sectors, as well as the headquarters of the Manufacturing sector, have hogged the limelight for some time and, while their importance to and influence over Mumbai's office market is undisputed, the growing contribution of the IT/ITeS sector has largely gone unnoticed. It is now time to recognise this contribution and applaud the sector’s climb to become the second-largest occupier base in a city that is India’s largest office market in terms of both scale and value.
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