By IANS
New Delhi : Nearly 40 million sq ft of office space was added in India last year, with the Bandra-Kurla Complex in Mumbai commanding the highest rentals even as the metro joined New York and Tokyo as the most expensive realty markets in the world, says a new study.
“The year 2007 will be remembered for the increased interest in understanding the Tier II and Tier III markets of India,” said Anshuman Magazine, chief of South Asia for the Los Angeles-based realty consultancy CB Richard Ellis.
“Occupiers have been looking closely at these non-metro markets that offer lower costs and possibly improved employee retention, compared to the mature markets,” Magazine said, while releasing the story on India’s real estate industry.
“Such was the frenzy to release supply to a ‘hot’ market that some micro-markets like the IT corridors in Chennai saw its office supply in 2007 multiply some six times from the new supply in 2006.”
The study said thanks to the addition of 39 million sq ft in new office space in 2007, the overall commercial office stock in the country increased to 53 million sq ft, taking the total stock to 190 million sq ft.
The developers ramped up their supplies massively because of spiralling rentals that also lured private equity funds into the realty industry, said the study by the consultancy that has some 300 offices worldwide.
“The rental trend has continuously risen this year, with significant rental escalations in markets like Gurgaon in the National Capital Territory and Outer Ring Road in Bangalore,” it said.
“The Bandra-Kurla Complex in the micro-market in Mumbai saw the highest rentals in the country, with asking rates around Rs.425 per sq ft per month – this is a whopping 80 percent increase from last year,” it said.
“The constrained supply pipeline in this market and the heavy interest from the financial companies in Mumbai is seen as the main reason for Mumbai joining the ranks of New York and Tokyo as the most expensive office markets in the world.”
Looking ahead, the study warns the hype in the real estate market also brings with it concerns about the viability of cost among the multinational companies and that all eyes were on how the rentals would move in 2008.
“In our opinion, the overheated markets of Mumbai and Gurgaon are in for some marginal rationalisation this year, with significant new supply expected close to the end of the year,” it said.
Bangalore was likely to continue with its tryst with the IT sector growth and consolidations with stable rentals, while Pune and Hyderabad will continue to find favour, especially for campus-style development.
“The Chennai office market appears to be headed for a marginal correction in prices, but this will not take away the steady demand for office space by the tenants in the city.”