Karan Singh Sodi, Managing Director – Mumbai, JLL India
On the back of declining interest in the traditional central business district (CBD) of Mumbai, some corporations are establishing their front-office functions in the secondary business districts (SBDs) and moving back-office activities to the suburban markets. Leading up to 2020, domestic corporations are expected to move up the value chain and look to give their staff more attractive working environments. This will further fuel the relocation from CBD to alternate business districts.
The SBDs have newer and better-quality buildings and look attractive but there is also a large and growing scarcity of carparks in SBD Central and SBD North, which is yet to be resolved. The government plans to support development of peripheral areas of Mumbai, with the objective of improving efficiency of labour by locating businesses closer to suburban residential clusters. This could help ease the peak hour traffic congestion and over-crowded transit infrastructure.
The city’s office market is also seeing more mixed-use projects in recent years, with retail components such as F&B outlets and supermarkets. Occupiers setting up offices are particularly drawn to developers with a multi-city presence, and those with private equity funding, in view of greater scalability, reliability and service levels. IT companies demand large land parcels, and are also gravitating towards suburban locations due to lack of available space in built-up areas.
How Mumbai’s micro-markets would evolve by 2020:
However, a few months ago, DBS Bank moved its office from one building to another within the CBD. Moreover, the government has conceptualized a rejuvenation plan that will drive the redevelopment of old buildings as well as new infrastructure projects, which will improve CBD’s connectivity with rest of the city. The total office stock is ~6 mn sft.
However, the district is grappling with problems arising from rapid urbanization and haphazard developments. The stock here is ~17.5 mn sft.
Overall, rental appreciation is expected around 2020 in the SBDs due to falling vacancy levels, and in the suburban markets due to a low base effect. On the other hand, CBD will see continued decline in rents – barring grade-A properties – due to scarcity of both large floor plates and modern amenities.
For Occupiers: Occupiers can plan their future space requirements and consolidate multiple offices at a single site with good connectivity to achieve operational efficiencies, reduce costs and address growth. Offices in well-located upcoming prime assets in Mumbai are likely to get pre-committed quickly; hence, awareness is crucial. Occupiers need to commit early to gain first-mover advantage in new buildings. They are advised to invest in occupancy planning and move management to ensure optimal office relocations for their organization.
For Investors and Developers: It will also be crucial for these stakeholders to anticipate tenants’ needs – with regards to office location, specifications and quality. The current grade-A office vacancy rate stands around 18%, with most of the vacancy being in stock that fails to meet the requirements of end-users. The vacancy in superior grade-A stock, however, is 9.5% only.
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