Title: INDIA EXCEEDS
Tags: real estate
Blog Entry: DELHI AND MUMBAI'S OFFICE SPACES ARE MORE EXPENSIVE THAN THOSE IN PARIS , NEW YORK , STOCKHOLM , MILAN , GENEVA , ROME , SHANGHAI AND LOS ANGELES. THIS SIMPLY SUGGESTS THE NON-AVAILABILITY OF SPACE IN INDIA AT COMPETITIVE RATES. The demand for office space in India continues to be strong, despite fears of some moderation in economic growth. According to the latest report of global consultancy firm CB Richard Ellis (CBRE) on fastest growing occupancy costs of office space in the world, Mumbai, Bangalore and Delhi featured at 8th, 22nd and 45th positions. While rentals in Mumbai grew at 40.7% in the last one year, they went up by 22.6% in Bangalore and by 15.3% in Delhi . However, Mumbai slipped from second place in November 2007 to the fourth place at present, on the scale of most expensive office markets in the world. London 's West End , Moscow and Tokyo dominate the list of costliest places in the world, in that order. Delhi continues to be at the seventh spot. According to Anshuman Magazine, CMD of CB Richard Ellis for South Asia , the drop in ranking is not due to rentals in Mumbai falling, but because of a significant increase in rentals in Moscow , where they almost doubled in the last one year. He said that the number four position of Mumbai is still very high and is reflective of the tight supply of prime office space in Mumbai and Delhi, and demand remaining constantly active. According to the report, office space in Mumbai and Delhi are costlier than in Paris , New York , Stockholm , Milan , Geneva , Rome , Shanghai , Los Angeles , among others. This clearly suggests the nonavailability of space in India at competitive rates. Magazine says: "Although absorption of office space remained brisk in most markets, continuous increases in occupancy costs have driven some companies to relocate beyond prime locations in cities including Tokyo , Hong Kong , Singapore and Mumbai." According to the report, rentals in Central Business Districts (CBD) in Mumbai and Delhi are Rs 738 per sq ft per month ($210.97 per sq ft per annum) and Rs 508 per sq ft per month ($ 145.16 per sq ft per annum). As against this, rentals in London are $300 per sq ft per annum, $142 per sq ft per annum in Paris , and $103.43 per sq ft per annum in New York . Rentals in Tokyo at $220.25 per sq ft per annum eased for the first time in the past three years, falling by less than one percent, as a number of large occupiers put expansion plans on hold. In India , however, the story is a bit different. Magazine says, "In India, supply remained limited in CBD areas, while facilities in secondary locations like Gurgaon and Noida in National Capital Region of Delhi have attracted office occupiers due to availability of superior quality office space." He said that in New Delhi , prime office rentals remained stable in the first quarter of 2008 and are expected to remain at current levels or increase marginally. New supply is expected to continue to be dismal in the CBD while the supply situation in the peripheral areas of Gurgaon and Noida is set to improve as a significant amount of supply is set to enter the market over the remainder of 2008, and in 2009. A clear trend is that when rentals go beyond a point, occupiers think it more prudent to move to secondary market areas rather than stick to the CBD at high costs. As there is hardly any supply going to come in the CBDs in the near future, the rentals in these areas continue to be high. But, in the peripheral and suburban areas, large supply is likely to come in near future. According to a CBRE report, the demand supply gap is expected to be much closer in 2008, with some micro markets even witnessing surplus stock by end of third quarter in 2008. "This is a welcome development from an end-user perspective, especially for the large space occupants and would only lead to enhanced take up in the medium to long term. However, rentals in peripheral markets of Gurgaon showed no sign of a meltdown in the January-March quarter, the report says. Transactions were reported in MG Road for rentals upwards of Rs 135 per sq ft per month and on the Golf Course Road at Rs 125 per sq ft per month. In the area, there is a lot of demand, which is evident from the huge transactions through pre-commitment for space, while it is under development. According to the report, pre-commitment remained a feature in DLF Cyber city, where rentals ranged from Rs 70 per sq ft per month to Rs 105 per sq ft per month. The report said rentals are expected to remain stable in the next quarter with additional supply on the MG and golf Course Road meeting the huge corporate demand. Noida continues to attract IT/ITeS companies primarily for back office operations. Rentals in Noida, the report mentions, were marginally higher in the last quarter but are expected to be steady with high supply available, especially in the industrial and institutional sectors. The absorption rates are expected to rise significantly this year with improved infrastructure and affordable rentals in relation to other areas in NCR. This augurs well as it will increase the economic activities in the region. Courtesy: ET dated: - 13 th June 2008
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