Several office deals in the pipeline, 0.75 million sq ft to be sold: Report
Although leasing momentum slowed in Q2 2017, demand for commercial space is expected to solidify in subsequent quarters, according to a recent report by realty consultancy Colliers International.
The report states that the outlook for the office market is optimistic as there are several deals in the pipeline amounting to 0.75 million sq ft (70,000 sq m) which are likely to close in the upcoming months.
There will be diversified occupier demand and displacement from CB Dare as in the upcoming quarters. Office transactions gained momentum in H1 2017, with a gross absorption of 2.9 million sq ft till date in the Mumbai commercial market.
Although the banking and financial services sector has always dominated the leasing scene in Mumbai, an increased traction has been witnessed from logistics, shipping, tourism, education, media, healthcare and pharmaceutical companies. Some other occupiers with intensified demand include data centres, co-working operators and warehousing companies.
At the back of upcoming supply in And heri, Na vi Mumbai and LBS, we also expect leasing activity to be concentrated mostly at these locations.
There is a strong supply pipeline of 4 million sq ft (372,000 sqm) in upcoming quarters, adds the report. Other locations like BKC and Goregaon with ready office stock are also likely to gar- ne r some interest from occupiers.
In most cities including Mumbai, commercial activity has witnessed displacement from the CB D locations and tenant preference has deviated towards peripheral and SBD locations.
Accordingly, the highest leasing momentum was witnessed in the Western suburbs which accounted for a 33% share in the overall leasing volume. Other SBD locations like central suburbs and central Mumbai contributed 21% and 14% respectively to the total transaction volume, while peripheral area like Navi Mumbai accounted for a 22% share.
On the other hand, prime business districts like Nari man Point, Marine Lines, Fort and BK C represented a mere 10% share in the total transaction volume. According to Colliers International, tenants would continue to move towards markets with qual- ity Grade A supply and affordable rents.
Although a few premium establishments continue to demand some of the highest rents in thecountry, over all rental values in Mumbai are slated to remain stable. Similarly, subdued investor activity and limited outright purchases should keep a check on capital values in the city.
The long-awaited Metro III that passes through most major commercial hubs in the city has finally commenced its construction. We believe that planned and upcoming infrastructure developments would play in favour of the commercial real estate in Mumbai. Going forward, we expect a positive outlook with improved leasing activity in the financial capital. The author is executive director for office services and investment sales at realty consultancy Colliers India
There will be diversified occupier demand and displacement from CBD areas in the upcoming quarters.