Wednesday, 20 January 2016

Office outlook- The workspace odyssey

From the rooftop of one of the buildings of BKC, it is clear that Mumbai's commercial properties continued to soar high in 2015. "Mumbai has been consistently performing as one of the star performers in the office space market for a long time. BFSI has been one the major sector, which has been buying or leasing office spaces across regions in Mumbai. Mumbai always has a healthy demand of Grade A office space as many new start-ups, e-commerce, pharma, IT and ITeS companies are looking to expand their operations in Mumbai and its vicinity. Mumbai, along with Bangalore and Delhi-NCR, are the top three regions in India for commercial office and retail space," says Devina Ghildial, Managing Director, South Asia, RICS.

With a pro-development government at the center, this year has turned out to be a great year for the commercial property market in India, according to experts. Office space and corporate growth continue to see a strong demand in established business hubs, as well as emerging IT markets. Mumbai has stood out and has fared very well in the commercial market, as the country's economic capital develops as an IT destination.

Chintan Sheth, Director, Sheth Corp, explains, "The year 2015 turned out to be very good for the commercial property segment, as it fared very well in all the parameters as mentioned below:

Demand: 2015 saw a multitude of Asian investors come forward, which has helped accelerate the growth of business and has thus increased the demand for commercial spaces. According to a recent study, India's transaction volumes have almost doubled from the previous quarter to US$1 billion in quarter 3. It is a combination of these factors that have led to the growth in demand of the commercial real estate market.

Supply: Developers have stepped up the pace and have supplied the city with the required office space. According to a recent report, Mumbai injected six million sq ft of new office space, which is a very positive number.

Rental Growth: After years of stable rental growth, thanks to the year-on-year supply, the remainder has been growing as projected previously and the infusion of capital into the business sector has led to the healthy growth of rentals.

Occupancy: According to a recent study, the leasing activity continued to improve in 2015 with Asia Pacific gross leasing volumes rising substantially by 27 percent year-on year."

Booming Locations: According to experts, Bandra-Kurla Complex (BKC) has undoubtedly been the preferred office location for major corporate firms. It currently offers investment-grade office stock spread across more than 35 buildings.

Ram Chandnani, MD, transaction services, CBRE South Asia Pvt. Ltd, explains, "BKC's growth may be accredited to the location advantage that it enjoys, since it's easily accessible by rail and road from the central and western suburbs, as well as from Thane and Navi Mumbai. Recently completed infrastructure projects such as the Kherwadi Flyover and the Santacruz-Chembur Link Road have further improved accessibility to the region. Upcoming connectors include an elevated road from Vakola Junction on the Western Express Highway, and a proposed flyover between Kurla and Vakola with an extension to BKC. The micro markets of Thane and Navi Mumbai have also been preferred by the occupiers for their back office operations, because of the prevailing low rental values and infrastructure upgrades."

Key takeaways: Mumbai’s office spaces in 2015

Experts believe that the consolidation of office space by corporate occupiers, along with lease renewals, were the main themes for Mumbai's office market in 2015. In spite of the general slowdown in the market, good quality office properties in key office districts, continued to attract healthy demand from corporate space occupiers throughout the year. "Connectivity, infra development, consolidation of office spaces, availability of small and medium sized Grade A office space all worked in favor of commercial office spaces in Mumbai during 2015. With corporates responding positively to the government's 'Make in India' philosophy, one will see a steady demand in Grade A office spaces that provide connectivity, green spaces, with well-equipped recreation areas to lead a balanced work-life atmosphere in 2016," opines Sundeep Jagasia, Managing Director, Shree Krishna Group.

Office Spaces:
- Expectations from 2016 office space leasing activity are likely to pick up.
- Workspace demand from banking and financial firms is expected to remain strong.
- New supply addition of corporate properties is likely to remain concentrated in the peripheral micro-markets.
- Rental values in a few front office locations, such as BKC and lower parel, are anticipated to witness a marginal increase.

Source: PropertyatNeoDevelopers.Wordpress.Com

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