City's office space leasing to pick up in 2015: CBRE

Written By Unknown on Rabu, 16 Juli 2014 | 23.25

Office space leasing activity in the city is not expected to move significantly before next year although the sentiment in the real estate sector is witnessing some improvement, says property consultant CBRE.

"Market sentiment in Mumbai's office space has seen a slight spurt in the April-June period compared to the last couple of quarters and is expected to fare better in Q3 of 2014," CBRE South Asia Chairman and Managing Director Anshuman Magazine said in a statement.

"However, ground realities in this segment are hardly likely to change this year as far as actual investments and project funding are concerned," he said. Although a gradual recovery is on the cards, office space leasing activity is not expected to move significantly before 2015, he said.

The micro-markets of Bandra-Kurla, Lower Parel and Andheri are likely to witness a reasonable level of corporate interest mainly due to a surplus supply situation, Magazine said. The rentals are, however, likely to remain stable in the micro-markets and would continue to remain so over the forthcoming quarters too, he added. According to CBRE, central business district of Nariman Point, Fort and Cuffe Parade saw sluggish transactions during the second quarter of the year.

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Magazine said: "Enquires remained limited to small and medium sized office spaces in some of the prominent commercial developments. Vacancy levels increased marginally owing to shift in occupier interest towards other cost effective micro- markets, while rental values declined owing to subdued demand levels."

Office leasing activity, however, picked up in Lower Parel, mainly driven by financial services and FMCG sectors which took-up mostly small to medium format office spaces. Worli and Prabhadevi also witnessed an increase in leased space during the review period, driven by pre-commitment in IT development in the previous quarters. "Despite this increase in office space absorption, overall occupier demand remained largely subdued, leading to a rental correction of about 2-3 percent on a quarterly basis in these markets," the property consultant said.

Though Bandra-Kurla Complex, Kurla (W) and Kalina witnessed few large sized transactions from the banking financial services and pharmaceutical industries, existing vacancy pressures in the area resulted in a rental decline of 2-3 percent over January-March 2014. Rentals remained stable on a quarterly basis at Andheri, Ville Parle and Jogeshwari, however, the completion of various infrastructure projects propelled demand for office space, CBRE said.

"Going forward, demand for corporate office space is likely to be concentrated in the city's secondary and peripheral markets, owing to the abundant availability of cost-effective Grade A options. Additionally, the completion of key infrastructure projects may help improve demand in certain micro-markets in the medium term," Magazine said.

Along with financial institutions and pharmaceutical firms, engineering companies are also likely to lead office space demand in the forthcoming quarters, he said. More traction is expected from corporate occupiers in the back-office market of Powai and Goregaon to the peripheral locations of Navi Mumbai and Thane in the coming quarters, the release said.


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