Mumbai Office Market

Snapshot 2013

Mumbai Oce Market Snapshot 2013

Highlights
The prevailing sentiment in 2013 was one of caution due to uninspiring economic conditions. Many Corporates put their investment decisions on hold, waiting to see how the economic scenario unfolds, especially in light of the forth-coming national elections. The decision to take up additional real estate office space was mostly put on hold; or companies aggressively looked to bring down their costs by adopting a consolidation strategy. Cumulative new leasing of office space in Mumbai in 2013 was 4.76 MN SF. This was 21% less than 2012. Absorption decreased in each subsequent quarter throughout the year, further confirming the downtrend.
2.5 2.0 IN MN SF 1.5 1.0 0.5 0.0 1.92 1.61 37% Q-o-Q AVERAGE FALL IN ABSORPTION

Quarter-on-Quarter Absorption

0.78

AVERAGE ABSORPTION 0.45

1Q

2Q

3Q

4Q

Demand
Most occupiers that leased new office space did so for two main reasons: Current lease agreement expiring Consolidation Strategy and moving towards equal or lower rents for superior office space
FMCG 5% Media & Entertainment 6% Pharmaceutical 10%

Industry Wise Absorption

Others 14%
1

IT/ITes 25%

In 2013 there were fewer businesses leasing new space for expansion purposes and fewer still took up space to set up a new business. Micro-markets like Central Mumbai, Navi Mumbai, Andheri East, and Western Suburbs together constitute approximately 70% of the total absorption. The BFSI and IT/ITeS were the major occupiers of new space, together accounting for 46% of the total absorption of office space.

BFSI 20%

Manufacturing 15% 3

Top 10 Transactions of the Year

Client
HSBC Cognizant ISDI Parsons Barclays Johnson & Johnson Clariant Chemicals Walt Disney Convergys Colgate Palmolive Tata Group

Building Name
Nesco Mindspace SEZ One India Bulls Annexe Nirlon Arena Space Reliable tech Park Solitaire Corp Park Gcorp L&T Business Park Lodha Sim Tools

Developer / Landlord
Nesco Group K Raheja Corp Indiabulls Real Estate Nirlon Arena Enterprise Reliable Group Satellite Group Gcorp L&T Realty Lodha Group

Area (In SF)

250,000 230,000 210,000 180,000 150,000 150,000 125,000 120,000 100,000 100,000

Location
Goregaon (East) Airoli Parel Goregaon (East) Andheri (East) Airoli Andheri (East) Thane Andheri (East) Thane

Transaction Quarter
1Q 2Q 2Q 1Q 1Q 3Q 1Q 2Q 4Q 1Q

Mumbai Office Market Snapshot 2013 | Colliers International

Supply & Vacancy

The total stock of office space in Mumbai is approximately 110 MN SF. The overall vacancy rate for the city is 15%. However, some micro-markets such as Andheri, Lower Parel, Malad, Goregaon and Thane Belapur Road have higher vacancy rate in the range of 18 to 22%. As a result of dampened office demand, developers refrained from building new office space. This is reflected in the reduction of 30% new office supply being added to the inventory; and also the limited new starts. 70% of the new supply, in 2013 which was approximately 3.5 MN SF was concentrated in Andheri-Kurla and Malad-Goregaon stretch. Due to the limited addition of supply, the vacancy rate has decreased marginally. Overall Grade A office space available for fit-out is currently at 7.8 MN SF, which is about 16% less than last years figure of around 9.3 MN SF.
12 10 8 6 4 2 0 2010

New Supply, Absorption & Vacancy

20% 16% 12% 8% 4% 0

2011

2012

2013

2014 F

2015 F

New Supply (In MN SF)

Absorption (In MN SF)

Vacancy (In %)

Rental & Capital Values

There was a marginal 3% YoY decrease in rentals in the CBD and Lower Parel, around 1% YoY decline in Andheri East and Kalina; while western and central Mumbai witnessed a marginal increase of 1% and 2% YoY respectively.

Average Rentals, Captial Trends & Forecast

240 210 180 150 120 90 60 30 0 2008 2009 2010 2011 2012 2013 2014 F 2015 F
FORECAST

2014 Prognosis
As in 2013, there will be limited new supply added to the stock in 2014. Including deferred projects, the new supply expected in 2014 will be approximately 4 MN SF Most of this supply will be located in suburban and peripheral micro-markets such as, Andheri, Goregaon, Malad and BKC. Due to the limited additional supply, rental values will remain stable in nearly all micro-markets barring those where vacancy rates are already much higher than the city's average, like Navi Mumbai and Thane. Andheri, BKC and Lower Parel will continue to interest occupiers; however the CBD will continue to lose share due to lack of availability of large floor plates, infrastructure, and distance from residential pockets in the city. As in 2013, landlords will be willing to offer greater incentives in 2014, rather than lowering base rentals. Numerous clients that have searched for an office space in 2013 will likely take up new space in 2014 post the national elections hoping for a more inspiring economic trend and improvement of sentiments.

30000 26250 22500 18750 15000 11250 7500 3750 0

Average Rental Trends (INR Per SF Per Month) Average Capital Trends (INR Per SF)

Mumbai Office Market Snapshot 2013 | Colliers International

Primary Authors:

62 countries on 6 continents
United States: 140 Canada: 42 Latin America: 20 195 EMEA: 85

Surabhi Arora Associate Director | Research +91 124 456 7500 surabhi.arora@colliers.com Amit Oberoi National Director I Valuation & Advisory Services & Research Sachin Sharma Assistant Manager I Research For Oce Services: George McKay South Asia Director I Oce & Integrated Services george.mckay@colliers.com Vikas Kalia National Director I Oce Services vikas.kalia@colliers.com Technopolis Building, 1st Floor, DLF Golf Course Road, Sector 54, Gurgaon - 122 002 TEL +91 124 456 7500

$2

billion in annual revenue

1.12

billion square feet under management

13,500

professionals

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