Rents for commercial office space in Grade A Indian cities continues to rise

By Vipin Agnihotri

Even as the Indian economy is seeing an upward spiral, it has come into the notice of The India Street that rents for commercial office space in Grade A Indian cities continues to rise. The IT/ITEs sector is still fuelling growth in the present quarter so upward pressure is still apparent.

In terms of statistic, Bangalore saw an overall absorption of 2.6 million sq. ft, 80-85 per cent of it by the IT/ITEs sector. On the other hand, cities like Hyderabad, Chennai, Kolkata and Mumbai are also experiencing an upward trend both in terms of absorption as well as rentals. Talking about the NCR region, there has been a dip in the overall absorption of the commercial office space, from 1.5 million sq. ft last quarter (Q1 of 2007-08) to 0.81 million sq. ft in the present quarter.

In my opinion, given this increase in overall demand and constrained by limited fresh supply over the coming two or three months, rentals are expected to continue their upward movement. However, when I talked with few real estate experts, some of them were of the opinion that there is going to be a correction in q3 and q4 of 2007-08.

It is worth mentioning in this regard that the Indian office space market is now close to its second 1995-96 crest. The pivotal factor here is that an over-supply situation has started hitting few markets and there are already signs of plateauing of rentals except in Mumbai and the Central Business Districts of the primary cities.

For example, rentals in Mumbai are expected to stabilize by the end of 2007 or in early 2008 when number of projects will be finished in areas such as Goregaon, Bandra-Kurla and Andheri. If experts are to be believed, Lal Bahadur Shastri Marg in Mumbai is expected to emerge as a preferred IT destination. Plenty of IT and commercial projects are expected to come up in this district.

Apart from Mumbai, Pune is also experiencing high growth. As a matter of fact, at least eight private IT SEZs are coming up in the city that will supply Grade A IT/ITEs lease space over next three-to-five years.

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Mumbai surpasses Hong Kong and Bejing as Financial Hub

Mumbai: Driven by high trading volumes for equities and good presence of global banking and financial services firms, Mumbai has grabbed a place in the world's top ten financial flow hubs list, beating Hong Kong and Beijing in China.

The city has been ranked tenth among the world's biggest centres of commerce in terms of the financial flow volumes by a survey compiled by Mastercard Worldwide, which takes into consideration size of financial services network besides equity, bond, derivatives and commodity contract transactions.

The list, lead by London and New York on the first two slots, include two other Asian cities -- Tokyo at fifth and Seoul at sixth positions, but does not have any representation from China -- another emerging Asian economy.

The other cities include Chicago, Frankfurt, Paris, Madrid and Milan.

"The Asia/Pacific, Middle East and Africa (APMEA) region boasts of three cities which got included in the premier league -- Tokyo, Seoul and Mumbai due to their high trading volumes in bonds and equities," Mastercard Worldwide said in its first Worldwide Centres of Commerce Index study.

The list is, dominated by European cities with as many as five of the top ten positions on financial flow metrics.

According to Mastercard Worldwide, the financial flow dimension is an integration of five indicators – financial services network, equity transactions, bond transactions, derivatives contracts traded and commodities contracts traded -- all carrying equal weightage.

The financial services network includes the presence and intensity of global banking institutions, insurance companies and global securities companies.

A Study in New India's Architecture

Below we have obtained the latest renderings and photos of Real Estate projects across India including Bangalore, Chennai, Kolkata, Delhi and Mumbai. This study highligts how quickly India's real estate industry is adopting world class architecture. Click on the speaker icon in the box below to play some background music.