Mapping post-Covid office rentals: Action shifts to eastern, central suburbs
There has been a continuous exodus of corporates from CBD Mumbai to other commercial hubs in the city. Traditionally, due to the ease of railway connectivity with Nariman Point, many stock brokers, chartered accountants, lawyers and consultants preferred offices in CBD
Mumbai: The Central Business District (CBD) of Mumbai, centered around Nariman Point in South Mumbai, has clocked negative office rental growth and the CBD at Bandra Kurla Complex has consolidated its position as the premium location, while eastern and central suburbs of the city have shown healthy rental growth, a new research report by CRE Matrix, a real estate data analysis platform, for September 2022, has indicated.
The report titled ‘Covid-19 Rental Impact Report’, which analysed data from 37 macro-markets across the country, broadly showed the India office story has bounced back, with 36 of them showing an increase in annualised rental growth. The sole macro-market to clock negative rental growth in the report is the old CBD of South Mumbai, which comprises areas like Byculla, Cuffe Parade, Fort, Marine Lines and Nariman Point.
In the pre-pandemic period between the year-end of 2017 and the same period of 2019, CBD Mumbai had clocked 1 per cent increase in office rent, but post-Covid it has logged -2 per cent, the report said.
“There has been a continuous exodus of corporates from CBD Mumbai to other commercial hubs in the city. Traditionally, due to the ease of railway connectivity with Nariman Point, many stock brokers, chartered accountants, lawyers and consultants preferred offices in CBD. Post Covid-19, there has been a structural shift in preference closer to residence, leading to a considerable rise in demand for small offices across Mumbai’s suburbs. Secondly, buildings in CBD Mumbai are old, offering very little amenities, facilities, etc. compared to newer buildings. The location alone is unable to justify the rentals,” Abhishek Kiran Gupta, CEO and Founder, CRE Matrix, told HT on Thursday.
In comparison, the CBD at Bandra Kurla Complex which had clocked -1 per cent rental growth pre-Covid, has bounced back with 6 per cent annualised rental growth, according to data analysed between year-end 2020 and year to date 2022.
Gupta, who co-authored the report, said office rentals in Nariman Point trade at an average of ₹215 per sq ft per month on chargeable area, while BKC commands an average of ₹300 per sq ft per month. “For a difference of INR 85 per sq ft per month on chargeable area, BKC clearly emerges as the winner that potentially can take it all,” he said.
The report shows how the offices are clearly moving to the suburbs in a big way post-Covid. The eastern suburbs comprising Bhandup, Chembur, Ghatkopar, Kanjurmarg, Mulund, Powai, Sion, Vidyavihar and Vikhroli which showed 4 per cent increase in annualised office rent have now shown an increase of 6 per cent, while central suburbs comprising Bandra, Kalina, Kurla, Santacruz which showed an increase of 3 per cent have also clocked 6 per cent increase.
“Availability of undeveloped land, good ongoing infrastructure and more planned infrastructure coming up, the trickle-down effect of significant growth in the residential segment have contributed to the growth of the business districts in these suburbs. Both eastern and central suburbs trade between 100-125 per sq ft per month and offer affordable options compared to BKC and Nariman Point,” Gupta said.
The other macro-markets in Mumbai Metropolitan Region (MMR) showed an increase post-pandemic, which was less than pre-Covid numbers. Central Mumbai macro-market comprising localities like Dadar, Elphinstone, Lower Parel, Parel, Prabhadevi, Wadala and Worli had logged 4 per cent increase pre-pandemic, which dipped to 3 per cent post-pandemic. The macro-markets in western suburbs -- Borivali, Goregaon, Jogeshwari, Kandivali, Malad -- had indicated 4 per cent increase in office rental pre-Covid, but post-Covid the growth rose marginally over 4 per cent. In Andheri, the office rental growth had slowed from 3 per cent to 1 per cent post-Covid, the report said.