Bandra-Kurla Complex faces falling rentals, space glut as companies relocate
[Editor: After Gold and Silver, now it is perhaps the time to witness a Crash in the Real Estate Market. I have predicted this 6 months back, if you could recall my earlier posts. I had at that time asked all to sell your properties and sit with cash. If the inflation falls further I am expecting the property prices in Mumbai (Bombay) to nose-dive to at least 20% from the current price, which is near BUBBLE STAGE. These kinds of prices cannot sustain for long, with Indian economy set to grow below 8% during the next couple of years. Even now, you can sell your real estate assets and invest a portion of that in the Stock?Share Market, where there are chances of high appreciation are increasing, as Inflation and Stock market are inversely related]
MUMBAI: Bandra-Kurla Complex (BKC) has been the most-sought-after address among city business districts over the past decade, but recent trends do not augur well for the commercial hub. The economic slowdown and the cost-cutting that followed have forced several corporations to move out of expensive rented offices in BKC and relocate to what experts call "low-cost destinations" elsewhere in Mumbai. Lease rentals in BKC, which were over Rs 300 a square foot a month, have dropped to around Rs 250 and less because of a lack of demand.
More worrisome, say sources, is that around 20% of offices there are currently vacant even as around 20 lakh sq ft of new commercial space is likely to be added to BKC in the next couple of years.
The Gemological Institute of America (India), which occupied two floors in Trade Centre, recently decided to vacate the premises it leased in 2008. The US-based, non-profit organization was paying a rent of Rs 40 crore/year. Franklin Templeton India, which occupied around 40,000 sq ft in Wockhardt Towers, has moved out too.
Automobile giant Volkswagen also decided to relocate from BKC. It had taken on lease 50,000 sq ft of space in Maker Maxcity at an astounding Rs 500 a sq ft a month. Volkswagen moved to the low-cost Andheri-Kurla Road. Its new headquarters in Silver Utopia is rented at just Rs 130 a sq ft a month. MSD Pharmaceuticals, which occupied around 40,000 sq ft in BKC's Platina building, is another major firm to move out. Source said Aon Hewitt is also relocating from Platina and is currently negotiating for office space in Kurla.
The only encouraging deal was the one recently signed by Oracle, for Rs 340 a sq ft in the new FIFC building.
"Around 15 lakh sq ft of commercial space in BKC is empty," a developer who didn't wish to be named said. He owns a commercial building and is renegotiating the rent as several clients have moved out.
Anshuman Magazine, chairman & MD, CBRE South Asia Pvt Ltd, said, "BKC witnessed close to 2 million square feet of prime office space being added in 2012. This led to vacancy levels going up." However, Magazine added, "Absorption levels have also witnessed an increase. With no new supply expected till the end of 2014, vacancy levels are likely to reduce and rents for top-end buildings are expected to gradually firm up in the short term."
Parth Mehta, CEO of Parinee Developers which owns Parinee Crescenzo in BKC, said, "Developers who quoted Rs 300-plus a square foot for rentals have now reduced the price to Rs 230 to Rs 250 a square foot plus maintenance for common area and property tax. A cash crunch has forced them to cut down on rentals."
Developer Vijay Wadhwa of Wadhwa Group, which has a large footprint in BKC (Platina, Trade Centre, Capital, One BKC), said small firms are shifting out, but financial companies and banks are moving in. Wadhwa added that recently a leading software firm signed a lease agreement for Rs 340 a sq ft in a new commercial tower there.
A property consultant said three new commercial buildings have added a total of 20 lakh sq ft to BKC's stock, while the demand is around 5 lakh sq ft a year. "Add to this that a secondary stock of 10% is always available in BKC," he said.
Rentals in BKC are on super-built-up area (lobby area, lift, staircase) while those in Nariman Point are on the actual carpet area of the office. Moreover, monthly outgoings in the newer buildings of BKC are far higher than outgoings at Nariman Point.
'15L sq ft commercial space in Bandra-Kurla Complex empty'
An increasing number of companies are leaving Bandra-Kurla Complex (BKC) for cheaper locations in other areas of the city. Franklin Templeton India moved out of Wockhardt Towers a couple of months ago, reportedly because of high rentals. It has since shifted its offices to Lower Parel (Indiabulls), where rentals are as low as Rs 125 a sq ft.
Automobile giant Volkswagen also decided to relocate from BKC. It had taken on lease 50,000 sq ft of space in Maker Maxcity at an astounding Rs 500 a sq ft a month. Volkswagen moved to the low-cost Andheri-Kurla Road. Its new headquarters in Silver Utopia is rented at just Rs 130 a sq ft a month. MSD Pharmaceuticals, which occupied around 40,000 sq ft in BKC's Platina building, is another major firm to move out. Source said Aon Hewitt is also relocating from Platina and is currently negotiating for office space in Kurla.
The only encouraging deal was the one recently signed by Oracle, for Rs 340 a sq ft in the new FIFC building.
"Around 15 lakh sq ft of commercial space in BKC is empty," a developer who didn't wish to be named said. He owns a commercial building and is renegotiating the rent as several clients have moved out.
Anshuman Magazine, chairman & MD, CBRE South Asia Pvt Ltd, said, "BKC witnessed close to 2 million square feet of prime office space being added in 2012. This led to vacancy levels going up." However, Magazine added, "Absorption levels have also witnessed an increase. With no new supply expected till the end of 2014, vacancy levels are likely to reduce and rents for top-end buildings are expected to gradually firm up in the short term."
Parth Mehta, CEO of Parinee Developers which owns Parinee Crescenzo in BKC, said, "Developers who quoted Rs 300-plus a square foot for rentals have now reduced the price to Rs 230 to Rs 250 a square foot plus maintenance for common area and property tax. A cash crunch has forced them to cut down on rentals."
Developer Vijay Wadhwa of Wadhwa Group, which has a large footprint in BKC (Platina, Trade Centre, Capital, One BKC), said small firms are shifting out, but financial companies and banks are moving in. Wadhwa added that recently a leading software firm signed a lease agreement for Rs 340 a sq ft in a new commercial tower there.
A property consultant said three new commercial buildings have added a total of 20 lakh sq ft to BKC's stock, while the demand is around 5 lakh sq ft a year. "Add to this that a secondary stock of 10% is always available in BKC," he said.
Rentals in BKC are on super-built-up area (lobby area, lift, staircase) while those in Nariman Point are on the actual carpet area of the office. Moreover, monthly outgoings in the newer buildings of BKC are far higher than outgoings at Nariman Point.
More worrisome, say sources, is that around 20% of offices there are currently vacant even as around 20 lakh sq ft of new commercial space is likely to be added to BKC in the next couple of years.
The Gemological Institute of America (India), which occupied two floors in Trade Centre, recently decided to vacate the premises it leased in 2008. The US-based, non-profit organization was paying a rent of Rs 40 crore/year. Franklin Templeton India, which occupied around 40,000 sq ft in Wockhardt Towers, has moved out too.
Automobile giant Volkswagen also decided to relocate from BKC. It had taken on lease 50,000 sq ft of space in Maker Maxcity at an astounding Rs 500 a sq ft a month. Volkswagen moved to the low-cost Andheri-Kurla Road. Its new headquarters in Silver Utopia is rented at just Rs 130 a sq ft a month. MSD Pharmaceuticals, which occupied around 40,000 sq ft in BKC's Platina building, is another major firm to move out. Source said Aon Hewitt is also relocating from Platina and is currently negotiating for office space in Kurla.
The only encouraging deal was the one recently signed by Oracle, for Rs 340 a sq ft in the new FIFC building.
"Around 15 lakh sq ft of commercial space in BKC is empty," a developer who didn't wish to be named said. He owns a commercial building and is renegotiating the rent as several clients have moved out.
Anshuman Magazine, chairman & MD, CBRE South Asia Pvt Ltd, said, "BKC witnessed close to 2 million square feet of prime office space being added in 2012. This led to vacancy levels going up." However, Magazine added, "Absorption levels have also witnessed an increase. With no new supply expected till the end of 2014, vacancy levels are likely to reduce and rents for top-end buildings are expected to gradually firm up in the short term."
Parth Mehta, CEO of Parinee Developers which owns Parinee Crescenzo in BKC, said, "Developers who quoted Rs 300-plus a square foot for rentals have now reduced the price to Rs 230 to Rs 250 a square foot plus maintenance for common area and property tax. A cash crunch has forced them to cut down on rentals."
Developer Vijay Wadhwa of Wadhwa Group, which has a large footprint in BKC (Platina, Trade Centre, Capital, One BKC), said small firms are shifting out, but financial companies and banks are moving in. Wadhwa added that recently a leading software firm signed a lease agreement for Rs 340 a sq ft in a new commercial tower there.
A property consultant said three new commercial buildings have added a total of 20 lakh sq ft to BKC's stock, while the demand is around 5 lakh sq ft a year. "Add to this that a secondary stock of 10% is always available in BKC," he said.
Rentals in BKC are on super-built-up area (lobby area, lift, staircase) while those in Nariman Point are on the actual carpet area of the office. Moreover, monthly outgoings in the newer buildings of BKC are far higher than outgoings at Nariman Point.
'15L sq ft commercial space in Bandra-Kurla Complex empty'
An increasing number of companies are leaving Bandra-Kurla Complex (BKC) for cheaper locations in other areas of the city. Franklin Templeton India moved out of Wockhardt Towers a couple of months ago, reportedly because of high rentals. It has since shifted its offices to Lower Parel (Indiabulls), where rentals are as low as Rs 125 a sq ft.
Automobile giant Volkswagen also decided to relocate from BKC. It had taken on lease 50,000 sq ft of space in Maker Maxcity at an astounding Rs 500 a sq ft a month. Volkswagen moved to the low-cost Andheri-Kurla Road. Its new headquarters in Silver Utopia is rented at just Rs 130 a sq ft a month. MSD Pharmaceuticals, which occupied around 40,000 sq ft in BKC's Platina building, is another major firm to move out. Source said Aon Hewitt is also relocating from Platina and is currently negotiating for office space in Kurla.
The only encouraging deal was the one recently signed by Oracle, for Rs 340 a sq ft in the new FIFC building.
"Around 15 lakh sq ft of commercial space in BKC is empty," a developer who didn't wish to be named said. He owns a commercial building and is renegotiating the rent as several clients have moved out.
Anshuman Magazine, chairman & MD, CBRE South Asia Pvt Ltd, said, "BKC witnessed close to 2 million square feet of prime office space being added in 2012. This led to vacancy levels going up." However, Magazine added, "Absorption levels have also witnessed an increase. With no new supply expected till the end of 2014, vacancy levels are likely to reduce and rents for top-end buildings are expected to gradually firm up in the short term."
Parth Mehta, CEO of Parinee Developers which owns Parinee Crescenzo in BKC, said, "Developers who quoted Rs 300-plus a square foot for rentals have now reduced the price to Rs 230 to Rs 250 a square foot plus maintenance for common area and property tax. A cash crunch has forced them to cut down on rentals."
Developer Vijay Wadhwa of Wadhwa Group, which has a large footprint in BKC (Platina, Trade Centre, Capital, One BKC), said small firms are shifting out, but financial companies and banks are moving in. Wadhwa added that recently a leading software firm signed a lease agreement for Rs 340 a sq ft in a new commercial tower there.
A property consultant said three new commercial buildings have added a total of 20 lakh sq ft to BKC's stock, while the demand is around 5 lakh sq ft a year. "Add to this that a secondary stock of 10% is always available in BKC," he said.
Rentals in BKC are on super-built-up area (lobby area, lift, staircase) while those in Nariman Point are on the actual carpet area of the office. Moreover, monthly outgoings in the newer buildings of BKC are far higher than outgoings at Nariman Point.
Courtesy: The Times of India
