– Ravi Ahuja –
Although the leasing momentum slowed down in Q2 2017, the commercial space demand is expected to solidify in the subsequent quarters. The outlook for 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 CBD areas 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 and according to Colliers Research, demand from these companies should continue to intensify.
As per market sources, the warehousing and logistics platform between Ascendas-Singbridge and Firstspace Realty has planned to invest in the growth of logistics and factory spaces in Mumbai and several other cities. In addition, e-Shang Redwood that has recently announced its entry in the Indian market plans to build logistics and warehousing parks of some Indian cities. With this backdrop and interest from international players, the office demand will pick up pace in the logistics and warehousing sector.
At the back of upcoming supply in Andheri, Navi Mumbai and LBS, we also expect leasing activity to be concentrated mostly at these locations. With major projects, such as Times Square Tower D, Rustomjee Central Park, Codename Smash Hit, Gigaplex Tower 3, etc. concentrated in these locations and slated for completion in 2017, there is a strong supply pipeline of 4 million sq ft (372,000 sq m) in upcoming quarters. Other locations like BKC and Goregaon with ready office stock are also likely to garner some interest from occupiers.
In most cities including Mumbai, commercial activity has witnessed displacement from the CBD 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 Nariman Point, Marine Lines, Fort and BKC represented a mere 10% share in the total transaction volume. According to Colliers International, tenants would continue to move towards markets with quality Grade A supply and affordable rents. Although a few premium establishments continue to demand some of the highest rents in the country, overall 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.
As per Colliers Research, in H1 2017, Mumbai Metropolitan Regional Development Authority (MMRDA) unveiled a budget targeting almost 70% of their funds towards infrastructure developments. Moreover, 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.
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About the Author
Ravi Ahuja
Author & Entrepreneur
About the AuthorRavi Ahuja, Executive Director, Office Services & Investment Sales, Colliers International India and Colliers Research. Ravi specializes in various asset classes in general and engages extensively in Office Leasing & Sales / Investments, Office Core Asset Acquisitions, Acquisition of Income Generating Assets, Capital Markets and Corporate Asset Monetization, and Residential. He is involved in identifying new opportunities, improving organizational efficiencies and strengthening Colliers’ presence in the markets across the country.
Ravi leads the India Office Services team as the Executive Director, and has been one of the most successful brokers over the years. He continues to contribute in generating revenues and aims to focus on increased knowledge delivery, targeted client engagement and service excellence.
Disclaimer : The views expressed by the author in this feature are entirely his own and do not necessarily reflect the views of INVC NEWS.
