Home » News » Real Estate
Sep 20, 2013, 04.28 PM IST | Source: Jones Lang LaSalle

Where to invest in commercial real estate in Mumbai

Over the last few years, the number of HNI investors and corporates who are seriously looking at investing into Indian office space has increased manifold.

By Ramesh Nair, Managing Director - West, Jones Lang LaSalle India

Over the last few years, the number of HNI investors and corporates who are seriously looking at investing into Indian office space has increased manifold. Mumbai continues to hold its own as India's numero uno office space investment destination, with companies from all over the world unerringly zeroing in on the financial capital. As South Asia's only true financial hub, Mumbai is among India's best places to invest in commercial real estate. In times of global economic uncertainty, investors flock to markets that have consistently proved their long-term stability and fundamentals.

In a scenario wherein institutional investors are showing reduced preference for commercial real estate in their portfolios, Mumbai continues to present HNI and corporate investors with myriad growth opportunities in office properties. However, the multitude of options also gives many enthusiastic investors heartburn - where on Mumbai's vast and complex map are the low-risk / high returns locations? Obviously, the lodestone for successful office space investment in Mumbai is market knowledge. 

Today, Mumbai as a city for commercial space investment reveals a high rate of vacancies in many locations. The rental yields in these micro-locations are expected to decrease marginally over the next 12 months. While this seems to present a depressing scenario on the surface, the fact is that we are now looking at the bottom of the curve. In other words, these markets are expected to bottom out over the next one year and will consequently start to move up again. These locations have significant long-term capital value appreciation potential, and well-informed investors are keeping a close eye on them. 
 
Mumbai Commercial Property Classified:

- The Central Business District (CBD) which includes the micro-markets of Nariman Point, Fort, Ballard Estate, Cuffe Parade and Churchgate

- The Secondary Business District (SBD) which includes the micro-markets of Worli, Lower Parel, Prabhadevi, Bandra Kurla Complex (BKC) and Kalina, and

- The Peripheral Business Districts of Andheri-Jogeshwari, Malad-Goregaon, Powai-LBS Marg and Thane-Navi Mumbai.

The commercial property investment opportunities vary according to the unique characteristics of each micro-market. At first glance, some of these markets would seem to be places to avoid, given the high vacancies there. However, some of these areas bear closer scrutiny beyond the seemingly obvious.

Data of past trends shows that rentals and capital values in almost all Mumbai micro-markets except Lower Parel and Andheri have either remained stable or gone up over the last 30 months. Many corporates are today migrating from the traditional CBD to BKC and Lower Parel. The motivation behind this migration is the age of the buildings, high rentals, lack of amenities and car parking, safety, maintenance and smaller floor plates in the CBD area.

Over the next two years, the rentals and capital values in Mumbai's CBD are expected to come down, rendering them more buyer and tenant-oriented for the first time in decades. Meanwhile, the SBD district of Lower Parel is seeing significant demand, given the fact that the rentals and capital values there are less than half of those in the CBD and at Bandra Kurla Complex. Over the next 12 months, the rental and capital values in Lower Parel are expected to bottom out. Commercial properties here are an excellent investment proposition at the current pricing levels.
 
Meanwhile, BKC is emerging as Mumbai's acknowledged 'alternate CBD', with many banks moving their headquarters there from their erstwhile CBD locations. Capital values and rental values in BKC are expected to go up in the medium term, making commercial properties there a good buy. The limited commercial space supply that BKC will have to address the strong demand over the next two years adds to its investment potential. Bandra Kurla Complex is particularly interesting to HNIs from the diamond industry, given its proximity to the diamond bourse.

- In Andheri, rentals and capital values are not going to improve significantly over the next 18 months, given the high vacancy levels currently prevailing there.

- The Western suburbs of Jogeshwari, Malad, Goregaon and Borivali are seeing healthy and growing demand due to the proximity to employee catchment zones. However, they will not see much rental and capital appreciation either because of the high quantum of existing supply.

- No major changes are expected in rentals and capital values in Eastern suburbs, where demand is keeping pace with supply

- Thane and Navi Mumbai will also remain stable, given the existing supply.

Office Space Investment Guidelines:

- Entrepreneurs who are considering buying commercial real estate for self-use should ensure that the amenities in the project match their business needs

- Investors need to make sure that they study the quality of building, location, demand supply dynamics and yield compression possibility

- The best buildings in each micro-market will always command a premium

- Check the developer credentials, potential for infrastructure development, access to public transport and quality of property management

- Investors looking at income-producing office assets should look at the break-up of cash flows, the vacancy factor, expenses such as maintenance, property tax and building insurance, lease term, lock-in period and expiry dates,  long term capital appreciation potential and refurbishment, refinancing and re-positioning potential.

ADS BY GOOGLE

Videos

more »

Property rates
  • Residential
  • commercial
Mumbai
Capital Values Rate/Sq ft (INR)
Aajiwali
3000 - 5000
Ambernath
3000 - 5000
Badlapur
1000 - 3000
Bhandup (West)
11000 - 13000
Chembur (East)
15000 - 17000
Chembur (West)
11000 - 14000
Dombivali (East)
4000 - 6000
Ghatkopar
13000 - 15000
Heeranandani Gardens Estate - Powai
25000 - 30000
Hiranandani Gardens Estate - Powai
25000 - 30000
Kalyan (East)
2000 - 4000
Kalyan( West)
3000 - 5000
Karjat
1000 - 3000
Khandala
8000 - 10000
Kharegaon
5000 - 7000
King Circle
17000 - 28000
LBS Marg
12000 - 15000
Lonavala
3000 - 5000
Mulund (East)
11000 - 14000
Mulund (West)
11000 - 14000
Mumbai Nasik Highway
3000 - 6000
Powai
15000 - 17000
Senapati Bhagath Singh Road
3000 - 5000
Sion (East)
18000 - 21000
Sion (West)
17000 - 22000
Tilak Nagar
12000 - 22000
Ulhasnagar
3000 - 5000
Vikhroli
11000 - 14000
4 Bunglows
17000 - 28000
7 Bunglows
13000 - 23000
Chandivali
10000 - 15000
Malad (East)
12000 - 14000
Versova
21000 - 24000
Airoli
4000 - 8000
Belapur
6000 - 9000
Ghansoli
6000 - 8000
Kalamboli
4000 - 9000
Kamothe
4000 - 6000
Nerul
7000 - 10000
Palm Beach Road
12000 - 15000
Panvel
3000 - 6000
Sanpada
8000 - 10000
Sea Woods
8000 - 10000
Ulwe
3000 - 6000
Uran
3000 - 6000
Vashi
9000 - 12000
Altamount Road
62000 - 72000
Breach Candy
62000 - 74000
Chowpathy
48000 - 58000
Colaba
42000 - 46000
Cuffe Parade
67000 - 69000
Dadar(East)
32000 - 34000
Dadar(West)
29000 - 32000
Lower Parel
32000 - 34000
Mahalaxmi
38000 - 40000
Malabar Hills
68000 - 75000
Mumbai Central
23000 - 34000
Napean Sea Road
66000 - 74000
Parel
26000 - 34000
Prabhadevi
37000 - 39000
Tardeo
41000 - 49000
Worli
36000 - 41000
Andheri (West)
18000 - 20000
Andheri(East)
15000 - 17000
Bevarly Park
5000 - 7000
Bhayander (East)
5000 - 6000
Bhayander (West)
3000 - 5000
Boisar
1000 - 3000
Borivali (East)
11000 - 13000
Borivali (West)
10000 - 14000
Dahisar
4000 - 8000
Goregaon (East)
13000 - 17000
Goregaon (West)
12000 - 14000
Kandivali (East)
12000 - 14000
Kandiwali (West)
11000 - 12000
Malad(West)
9000 - 14000
Mira Road
5000 - 7000
Naigaon
1000 - 4000
Nala Sopara (Eastt)
3000 - 5000
Nalasopara (West)
3000 - 5000
Poonam Nagar
6000 - 8000
Shanti Nagar
7000 - 9000
Shrishti
6000 - 9000
Vasai Road
1200 - 4000
Virar
1000 - 3000
Note: Price trend are based on asking rate and not necessarily on the transaction date
Explore Moneycontrol

Copyright © e-Eighteen.com Ltd. All rights reserved. Reproduction of news articles, photos, videos or any other content in whole or in part in any form or medium without express written permission of moneycontrol.com is prohibited.