Rentals soar as corporates seek prime office space

NO CEILING HERE: The office rentals market in Mumbai saw high-ticket deals in the past six months.

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Keywords: Rentals, Office Space

Mumbai: Rentals for office space in the prime areas in metros are showing no signs of cooling off. There is very little fresh supply in central business districts and demand is continuing to soar.

Over 50 million sq ft of new office space will come in by the end of this year in the metros. But that's hardly any respite for corporates seeking office space in prime areas. That's because most new offices would be in the suburbs. Experts say this will keep rentals on a high.

"The rental rates in certain micro-markets like Mumbai and prime Delhi are, in fact, exceptional and are one of the most expensive in the world. The reason is that in these areas there is just no supply. Either there's no land for development,” said MD (South Asia), CB Richard Ellis, Anshuman Magazine. “Besides that, the FSI allowed is very low and because of the zoning issues, there is just almost nil new supply coming in.”

Office rentals market in Mumbai saw some high ticket deals in the past six months.

Barclays bank recently picked up 15,000 sq ft of office space in Worli for a whopping Rs 1 crore a month. Sequoia Capital picked up space for about Rs 600 per sq ft a month in Worli. The Consulate of Spain spent Rs 525 per sq ft and the Saudi Arabian airlines paid over Rs 500 per sq ft a month for an office in Nariman Point.

Office rentals in cities like Delhi and Mumbai have been as high as Rs 500 per sq ft per month, for the past one and a half years. The Barclays Bank deal has once again raised the bar for high rentals in the prime areas.