1 Research & Forecast Report | January 2015 | Colliers International

Transaction volumes pick up towards the end of the yearThe first three quarters of the year remained quite dull for the Mumbai commercial office market with falling absorption and negligible new supply. However, the market revived towards the end of the year as transaction volumes picked up in 4Q 2014. Despite a revival in demand, the total absorption of 3.12 million sq ft in 2014 was 44% lower than the 5.6 million sq ft absorption witnessed in 2013.

The average deal size declined significantly this year and approximately 60% of the transactions fell in the range of 5,000 to 20,000 sq ft. The primary reason for this decline is limited participation of cost-conscious IT/ITeS companies and cautious occupier sentiment in view of the economic slowdown witnessed in the previous years. Many corporations put their investment decisions on hold, waiting to see how the city’s economic scenario shapes up, especially in light of the new policies expected to be set by the new state government.

BFSI, with a 39% share, continued to be the dominant sector leasing office space in Mumbai, followed by engineering (15%) and IT/ITeS (8%). Western suburbs, including locations like Andheri East, Goregaon and Malad, remained the most preferred location among occupiers and had about a 32% share of the total absorption, followed by Thane (19%) and BKC (18%).

New supply added to the Mumbai market during 2014 was 3.3 million sq ft. This is well below the 5 year average of new annual supply of 8 million sq ft. Approximately 7.4 million sq ft of vacant Grade A office space is available for lease or sale in the Mumbai office market. Overall vacancy levels

Rental Values

*Indicative Grade A rents in INR per sq ft per month**Nariman Point, Ballard Estate & Fort

Research & Forecast Report

Mumbai | OfficeJanuary 2015

MICRO MARKETS RENTALVALUE*

% CHANGEQoQ YoY

CBD** 200 - 230 0% -12%

Worli/Prabhadevi 185 - 225 1% 2%

Lower Parel 145 - 190 5% 4%

BKC 225 - 320 0% 0%

Kalina 150 - 200 0% -9%

Goregaon / JVLR 100 - 110 0% 10%

Andheri East 80 - 130 0% -3%

Malad 80 – 100 0% 5%

Powai 110 - 130 0% 9%

Navi Mumbai 45 - 90 0% 22%

Thane / LBS 50 - 100 0% 13%

City Office Barometer

INDICATORS 2014 2015

Vacancy

Absorption

Construction

Rental Value

Capital Value

2 Research & Forecast Report | January 2015 | Colliers International

Source: Colliers International

have fallen to 14% in 2014 from 14.5% in 2013. There is around 11 million sq ft of new Grade A office space forecast to be completed in 2015; however, most the supply is expected to hit the market towards the end of 2015.

While capital values have remained largely stable across all micro-markets, the overall rents witnessed a 4% YoY increase in 2014 despite lower absorption levels due to limited new supply and lack of quality office space.

In 2014, the city got a major infrastructure boost, as Mumbai’s much awaited first Metro Rail started operations this year connecting Versova, Andheri and Ghatkopar on an 11.4 km stretch, providing swift connectivity. Apart from this, the state government has also increased the ready reckoner rates for residential and commercial properties by up to 20% in 26 posh zones.

Trends to watch for in 2015:

The office market of Mumbai has started showing strong fundamentals, which is evident from the revived occupier interest. With the new state government in place and positive vibes from the centre in terms of favourable policies for the city’s real estate and major infrastructure projects, the city is likely to augur well in 2015. Over the next six months, we anticipate a rise in commercial demand in this market with tenants seeking quality office space. Given the lack of supply and increasing demand, we also expect a positive outlook for landlords, while in the second half of 2015, approximately 11 million sq ft office supply is expected to hit the market, which will help keep rents stable during the year.

Notes:

1. Office Market: The major business locations in Mumbai are the CBD (Nariman Point, Fort and Ballard Estate), Central Mumbai (Worli, Lower Parel and Parel), Bandra Kurla

Complex (BKC) and Andheri Kurla stretch. Powai, Malad and Vashi are the preferred IT/ ITES destinations, while Airoli at Navi Mumbai and Lal Bahadur Shastri Marg are

emerging as new office and IT/ITES submakets.

2. Rents/Capital Value: Market average of indicative asking price for Grade A office space.

3. Available Supply: Total Grade A office space being marketed for sale or lease in surveyed quarter.

4. City Barometer: Represents increase, decrease or stable scenario; as compared to previous quarter.

5. All the figures in the report is based on market information as on 25th December 2014.

Top 5 Transactions of 2014

Key Under Construction Projects

CLIENT BUILDING NAME AREA (SF) LOCATION LEASE / SALE

Edelweiss Capital Kohinoor City 133,000 Kurla Sale

Willis Insurance India i-Think Techno Campus 130,000 Thane Lease

DHL India Silver Utopia 100,000 Andheri East Lease

Pfizer India The Capital 90,000 BKC Lease

Poddar International School Hamilton 90,000 Thane Lease

BUILDING NAME DEVELOPER AREA (SF) LOCATION POSSESSION

Godrej BKC Godrej Properties 1,020,000 BKC 2015

Seawood Grand Central Tower I & II L & T Infrastructure 1,350,000 Navi Mumbai 2015

Lodha Codename Business Class Lodha Group 1,260,000 Thane 2015

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Primary Authors:

Surabhi Arora Associate Director | Research +91 124 456 7500surabhi.arora@colliers.com

Sachin Sharma Assistant Manager | Research

Amit Oberoi I National DirectorValuation & Advisory Services & Research

For O�ce Services:

George McKaySouth Asia Director | O�ce & Integrated Servicesgeorge.mckay@colliers.com

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