Traditionally dominated by the banking and financial services sector, the Mumbai commercial market experienced diverse new leasing activity in Q1 2017 with demand driven primarily by companies in the logistics, media, advertising, fast-moving consumer goods (FMCG) sectors and law firms. With several big transactions currently in play, we expect a significant increase in leasing by these companies in the upcoming quarters. We expect Grade A supply to remain a concern in the city and suggest that occupiers consider optimising their workplace efficiency.

1. Leasing activity to
revive in Q2 2017
Uttara Nilawar Manager | Mumbai
Traditionally dominated by the banking and financial
services sector, the Mumbai commercial market
experienced diverse new leasing activity in Q1 2017
with demand driven primarily by companies in the
logistics, media, advertising, fast-moving consumer
goods (FMCG) sectors and law firms. With several
big transactions currently in play, we expect a
significant increase in leasing by these companies in
the upcoming quarters. We expect Grade A supply to
remain a concern in the city and suggest that
occupiers consider optimising their workplace
efficiency.
Forecast at a glance
Demand
Demand is likely to follow supply with
preference for Grade A stock; shared
space should gain momentum due to
dearth of quality grade A stock
Supply
New supply will mostly be in the form of
small floor plates across most Mumbai
micromarkets
Vacancy rate
Vacancy levels should remain stable in
most locations except Andheri and Navi
Mumbai due to the strong supply
pipeline
Rent
A stable rent scenario should prevail in
Mumbai. We expect a 3-4% rise in
secondary business districts
Price
Capital values likely to remain stable in
the short term
Relocation transactions dominate
the office leasing market
In Q1 2017, relocation transactions outnumbered
expansions and new entrants, thereby dominating the
office leasing market in Mumbai. With absorption of 1.7
million sq ft (157,935 sq m), the leasing market remained
subdued in Q1 2017 recording a 10% decline q-o-q.
Although leasing remained subdued, increased interest
from investors is evident in the commercial property
market. We observed a few outright purchases in Q1
2017. According to market sources, the pharma major,
Zydus Healthcare has bought 80,000 sq ft (7,432 sq m)
of office space in Goregaon East at INR1.72 billion
(USD0.3 billion). ICICI Prudential Life Insurance Co. Ltd
has also recently bought one floor covering 35,000 sq ft
(3,252 sq m) in the Crescenzo building at Bandra Kurla
Complex (BKC). Netmagic, a major player in the data
centre market has supposedly entered into an
agreement with Hiranandani and Balaji Groups to
purchase a commercial building in Chandivali (Powai) for
INR3.21 billion (USD0.5 billion). We foresee that investor
interest will remain elevated for Grade A non-strata sale
buildings in the city.
Rental Values
Micromarkets Rental
Values1
q-o-q
Change
y-o-y
Change
CBD2
200 - 250 0% 0%
Andheri East 90 - 130 0% 0%
BKC 225 - 320 0% 0%
Lower Parel 145 - 190 0% 0%
Malad 80 - 100 0% 0%
Navi Mumbai 70 - 100 0% 0%
Powai 120 - 130 0% 0%
Worli/Prabhadevi 180 - 210 0% 0%
Goregaon/JVLR 120 - 140 0% 0%
Kalina 150 - 210 0% 6%
Thane 70 - 90 0% 12%
LBS3
130 - 150 0% 0%
Source Colliers International India Research
1
Indicative Grade A rentals in INR per sq ft per month
2
Nariman Point, Ballard Estate and Fort
3
Lal Bahadur Shastri Marg
Colliers Quarterly
MUMBAI | OFFICE
13 April 2017

2. 2 Colliers Quarterly | 13 April 2017 | mumbai | office | Colliers International
Although banking and financial services usually account
for a big share in Mumbai leasing, a major shift in leasing
concentration was observed in Q1 2017. Companies in
logistics, media, advertising, FMCG and law firms
accounted for a 35% share in total leasing volume, while
other demand drivers like engineering & manufacturing,
technology firms, banking and financial services (BFSI)
along with healthcare & pharmaceuticals recorded a
20%, 19%, 18% and 5% share respectively of the overall
leasing volume. Consulting formed only a 3% share; we
are expecting several large deals to conclude in the
upcoming quarters by global consulting giants, which
should revive the absorption numbers.
In Q1 2017, the average deal size was in the range of
16,000-18,000 sq ft (1,486-1,672 sq m), a 30% decline
since Q4 2016.
The Western suburbs recorded a 37% share in leasing
volume with occupiers' preference concentrated in
Andheri and Goregaon. Owing to the available Grade A
stock, Central suburbs and Navi Mumbai recorded a
27% and 15% share of leasing; while other micromarkets
like Central Mumbai, Thane, BKC and CBD accounted
for 21% share in absorption.
In our opinion, demand will follow supply; hence
occupiers' preference should remain concentrated in the
western suburbs, central suburbs and Navi Mumbai.
With premium completions in Q1 2017 such as
Empressa, ATL Corporate Park and Crescent Business
Square totalling to 0.4 million sq ft of new office stock
(37,161sq m), Andheri micromarket in the western
suburbs should continue to outperform.
Gross Office Absorption in million sq ft
Source: Colliers International India Research
New supply addition to increase
vacancy in Andheri and Navi
Mumbai
While the supply pipeline dried up in Thane, Powai and
CBD with vacancy levels averaging 4-5%; markets such
as Andheri and Navi Mumbai experienced a vacancy
rate of 20%. With major developments such as Kanakia
Wall Street, Times Square Tower D, Skyline Icon
Corporate Park and Platinum, Andheri should witness
supply addition of about 3 million sq ft (278,709 sq m) in
the next two years. Navi Mumbai should also be a
frontrunner in quality Grade A supply infusion with
almost 6 million sq ft (557,418 sq m) of new supply by
2020. The upcoming supply pipeline in both these
micromarkets should put further upward pressure on
vacancy levels in coming quarters.
On the other hand, markets like Thane, Powai, CBD and
LBS should be challenged by significant supply
constraints as no major development is scheduled for
completion in these micromarkets.
Rental & Capital Value Trend (INR)
Source: Colliers International India Research
Note. The above graph represents average Grade A rents in INR per
sq ft per month and average capital values on an INR per sq ft basis
Rental values to remain stable
Rental values were unchanged since Q4 2016 owing to
a steady supply and demand in most micromarkets. The
stable rent scenario is likely to continue in the future as
well since occupiers are looking to optimise costs and
expand to locations with available quality stock. As there
is a dearth of Grade A contiguous large floor plates
across Mumbai, select buildings should continue to
demand a premium over market average rent depending
on demand supply dynamics at the micromarket level.
Although there were a few outright purchases in the city
in Q1 2017, we expect capital values to remain stable in
the short term.
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Rental Values Capital Values

3. 3 Colliers Quarterly | 13 April 2017 | mumbai | office | Colliers International
We expect a significant increase in transaction volumes
in coming quarters owing to a number of market
transactions currently in play. Demand is likely to be led
by logistics and pharmaceutical companies, consulting
firms and serviced offices. Back office operations of a
few banking and financial companies moved to Navi
Mumbai in Q4 2016 and Q1 2017. We expect this
number to increase in coming quarters as occupiers may
continue to relocate at affordable locations in Navi
Mumbai. Rental and capital values are set to remain
stable as the tenant demand of smaller plate sizes
should be met by most micromarkets for the next few
months.
Recently, City and Industrial Development Corporation
(CIDCO) awarded the first phase of the Navi Mumbai
airport to the GVK Group. In addition, work on Metro II A
& B and Metro III is in full swing. These projects should
improve connectivity in Mumbai significantly, thereby
affecting the office market positively.
The revised Mumbai Development Plan (DP) although
delayed due to several corrections and alterations, is
likely to be finalised soon. Builders keenly await the
same to get clarity on the Development Control Rules
(DCR) to be followed for ongoing and planned projects.
Colliers View
MAJOR TRANSACTIONS IN Q1 2017
CLIENT BUILDING NAME AREA (SQ FT) LOCATION LEASE/SALE
General Mills Venture 1,85,000 Powai Lease
Tata Consulting
Engineers (TCE)
Empire Tower 90,000 Navi Mumbai Lease
FCBUlka Chibber House 80,000 Andheri Lease
Bisleri Bisleri Compound 80,000 Andheri Lease
FIS Global Fairmount 80,000 Powai Lease
Source: Colliers International India Research
KEY UNDER CONSTRUCTION PROJECTS
BUILDING NAME DEVELOPER AREA (SQ FT) LOCATION POSSESSION
Codename Smash
Hit
Neptune Developer 1,040,000 Bhandup 2017
Wall Street Kanakia 780,000 Andheri 2017
Source: Colliers International India Research
Notes:
1. Office Market: The major business locations in Mumbai are the CBD (Nariman Point, Fort and Ballard Estate), Central Mumbai (Worli, Lower
Parel and Parel), Bandra Kurla Complex (BKC) and Andheri Kurla stretch. Powai, Malad and Vashi are the preferred IT-ITES destinations, while
Airoli at Navi Mumbai and Lal Bahadur Shastri Marg are emerging as new office and IT-ITeS submakets.
2. Rents/Capital Value: Market average of indicative asking price for Grade A office space.
3. Available Supply: Total Grade A office space being marketed for sale or lease in surveyed quarter.
4. All the figures are based on market information as on 25th March 2017
Copyright © 2017 Colliers International.
The information contained herein has been obtained from
sources deemed reliable. While every reasonable effort has
been made to 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.
For more information: Nishith Agarwal
Surabhi Arora
Senior Associate Director |
Research
Tel: +91 124 456 7500
Surabhi.arora@colliers.com
Senior Associate Director | Office Services
Nishith.agarwal@colliers.com
Ravi Ahuja
Executive Director | Office Services
Ravi.ahuja@colliers.com
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Elphinstone (W),
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