Mumbai’s Upscale Office Market Has Been Pandemic-Resilient
Tower cranes operate at an Indiabulls Real Estate commercial building construction site in the Lower Parel area of Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

Mumbai’s Upscale Office Market Has Been Pandemic-Resilient

As India imposed one of the harshest curbs to contain the pandemic in March, offices were shut and employees logged in from home. That threatened to permanently alter the demand for commercial real estate. But in Mumbai, India’s costliest real estate market, landlords of upscale office locations have seen demand sustain despite tenants quitting space and pressure on rentals.

A compilation of data for eight key micro-markets in India’s financial capital—Bandra-Kurla Complex, Lower Parel, Worli, Goregaon, Malad, Kurla, Vikhroli and Powai—suggests that leasing has slowed. But Grade-A commercial properties in these areas continue to perform better, reporting strong rental collection.

  • Prominent office projects analysed—accounting for 22% of completed Grade-A inventory and one upcoming project—had a 39% share of gross leasing activity recorded so far in 2020 in the city.
  • Fresh leasing contributed 50%, followed by term renewals at 46%.

Here’s what the data shows:

Vacancies Not That Bad

Considering the widespread disruption caused by Covid-19, vacancies in some of the premium office areas have not been that bad compared with the previous year.

The Exits

Though there has been exits in the second and third quarters, the number is lesser than fresh leases/term renewals for the buildings analysed.

Long-Term Contracts

The net demand held up in the Grade A buildings analysed, at least for now. Most of these fresh leases and renewals are long-term contracts with a minimum tenure of five years or more.

Grade A office buildings with the institutional ownerships always have had a good holding power and have managed to keep the rentals stable, according to Gautam Saraf, Managing Director-Mumbai, Cushman & Wakefield. “We did see a correction in the range of 8% to 12%, yet it has not been uniform across all the micro-markets.”

According to Neel Raheja, president, K Raheja Corp., quality tenants have continued to pay the rent and collection of most of the commercial developers is above 95%. “In terms of work from home, since people haven’t come back to work, the new leasing activity has been slow,” Raheja said at a real estate summit organised by developers’ lobby Naredco.

Raheja, however, said many domestic companies are moving from central business districts to suburban areas to save on rent and some are also exploring the option of flexi-seatings. The pandemic, he said, has increased the demand from global companies looking to shift to India to cut costs.

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