Business Immo, the real estate website
Property Times

Mumbai : Occupiers wary of expansion - Q1 2014

Published on

A research produced by

The domestic economic environment remained challenging in Q1, with the latest GDP data indicating modest growth rate of 4.7% in Q4. Inflationary pressure, though stabilised, still remained high as do interest rates. However, both fiscal deficit and current account deficits remained within the target range. The Reserve Bank of India (RBI) granted preliminary banking licences to two entities after a year-long application process and indicated that issuance of new banking licences will now be a continuous process.

In Q1 2014, occupiers in Mumbai remained cautious due to uncertain conditions arising from the upcoming general elections. As a result, take-up of office space declined by 4% to 1 million sq ft compared to 1.05 million sq ft in Q4 2013. The pharmaceutical sector emerged as the largest contributor to take-up in Q1 as against the predominant BFSI and IT sectors in the previous quarter.

About 1.87 million sq ft of new supply of office space was added to existing stock in Q1 (Figure 1). However, due to lower pre-commitments in new supply, the vacancy level in office space increased marginally from 20.4% in Q4 2013 to 21.1% in Q1. With low demand for the CBD, average rents declined to under INR 250 per sq ft. The New CBD also witnessed a decline of 8% in average rental values. The decline in rents can largely be attributed to low demand from the BFSI and IT sectors in Mumbai.

The retail segment also witnessed lacklustre market activity in Q1 as most retailers deferred their expansion plans to the latter half of the year. Also no new malls are expected to become operational in 2014.

The vacancy level in malls increased from 14.3% in Q4 to 16.5% in Q1. This rise in vacancy is largely due to tenants exiting underperforming malls located in the east and peripheral locations. Notwithstanding this, the low vacancy levels in grade A malls coupled with consistent demand for these malls resulted in average rents increasing by approximately 4% during the quarter.

Source :DTZ (Grouope UGL)