Mumbai office market snapshot 2013 report

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The report will provide you a year-end review of the Mumbai office market and the prognosis for 2014. The Highlights of the report are as follows:

• The prevailing sentiment in 2013 was one of caution due to uninspiring economic conditions.
• Cumulative new leasing of office space in Mumbai in 2013 was 4.76 MN SF
• The BFSI and IT/ITeS were the major occupiers accounting for 46% of the total absorption.
• In 2014, Landlords will be willing to offer greater incentives, rather than lowering base rentals.
• Occupiers holding decisions in 2013 are likely take up new space in 2014 post the national elections hoping for a more inspiring economic trend and improvement of sentiment

For More information:
Please contact
Surabhi Arora | Associate Director | Research
Surabhi.arora@colliers.com

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Mumbai office market snapshot 2013 report

  1. 1. Mumbai Office Market Snapshot 2013
  2. 2. Mumbai Office Market Snapshot 2013 Quarter-on-Quarter Absorption Highlights 2.5 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. IN MN SF 2.0 • 37% Q-o-Q AVERAGE FALL IN ABSORPTION 1.92 1.61 • 1.5 1.0 0.78 AVERAGE ABSORPTION 0.45 0.5 0.0 1Q Demand 2Q 3Q 4Q Industry Wise Absorption Most occupiers that leased new office space did so for two main reasons: • • Others 14% Consolidation Strategy and moving towards equal or lower rents for superior office space 1 Current lease agreement expiring IT/ITes 25% FMCG 5% Media & Entertainment 6% 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. 2 BFSI 20% Pharmaceutical 10% Manufacturing 15% 3 Top 10 Transactions of the Year Client Developer / Landlord HSBC Nesco Nesco Group 250,000 Goregaon (East) 1Q Cognizant Mindspace SEZ K Raheja Corp 230,000 Airoli 2Q ISDI Parsons One India Bulls Annexe Indiabulls Real Estate 210,000 Parel 2Q Barclays Nirlon Nirlon 180,000 Goregaon (East) 1Q Johnson & Johnson Arena Space Arena Enterprise 150,000 Andheri (East) 1Q Clariant Chemicals Reliable tech Park Reliable Group 150,000 Airoli 3Q Walt Disney Solitaire Corp Park Satellite Group 125,000 Andheri (East) 1Q Convergys Gcorp Gcorp 120,000 Thane 2Q Colgate Palmolive L&T Business Park L&T Realty 100,000 Andheri (East) 4Q Tata Group 1 Building Name Lodha Sim Tools Lodha Group 100,000 Thane 1Q Area (In SF) Mumbai Office Market Snapshot 2013 | Colliers International Location Transaction Quarter
  3. 3. 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 year’s figure of around 9.3 MN SF. New Supply, Absorption & Vacancy 20% 12 10 16% 8 12% 6 8% 4 4% 2 0 2010 2011 2012 New Supply (In MN SF) 2013 2014 F 0 2015 F Vacancy (In %) Absorption (In MN SF) 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 30000 2014 Prognosis 240 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. 180 22500 150 18750 120 15000 90 11250 60 7500 30 3750 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. 2 Mumbai Office Market Snapshot 2013 | Colliers International FORECAST 210 0 2008 2009 2010 2011 2012 2013 2014 F 2015 F Average Rental Trends (INR Per SF Per Month) Average Capital Trends (INR Per SF) 26250 0
  4. 4. Primary Authors: 62 countries on 6 continents United States: 140 Canada: 42 Latin America: 20 195 EMEA: 85 $2 billion in annual revenue 1.12 billion square feet under management 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 Office Services: George McKay South Asia Director I Office & Integrated Services george.mckay@colliers.com Vikas Kalia National Director I Office Services vikas.kalia@colliers.com Technopolis Building, 1st Floor, DLF Golf Course Road, Sector 54, Gurgaon - 122 002 TEL +91 124 456 7500 13,500 professionals About Colliers International Colliers International is a global leader in commercial real estate services, with over 13,500 Corporation, Colliers International delivers a full range of services to real estate users, owners and investors worldwide, including global corporate solutions, brokerage, property and asset management, hotel investment sales and consulting, valuation, consulting and appraisal services, colliers.com Copyright © 2013 Colliers International. ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.

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