20% to 40% Correction Expected in Mumbai Commercial Real Estate

April 6, 2009	(1 votes, average: 5 out of 5)  Loading ...
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After the decline of residential realty rates, the commercial real estate market in the city is expected to make a 20-40 per cent correction. A recent report by Jones Lang LaSalle Meghraj has predicted the short term rental corrections in various micro markets across the country. The report, The Slope of the Decent, states that riding on a boom and expecting tremendous demand for commercial space, developers have constructed extensively across cities from 2005 to 2008. This is evident from that the commercial space supply in the country grew more than three times in four years, from 43 million sq ft by the end of 2004 to 140.7 million sq ft by 2008-end.

However, the JLLM report states that rentals have started falling and are expected to drop further over the next two years. The steepest fall has been predicted in Central Mumbai (Worli, Parel, Prabhadevi, Lower Parel, Dadar), Western suburbs (Malad, Goregaon) and Eastern suburbs (Ghatkopar, Vikhroli, Kanjurmarg, Powai). These areas are set to witness high vacancy levels and a sharp decline of rates of 30-40 per cent from its peak levels in 2008. It attributes the high price correction to the oversupply and appreciation that these areas have seen in the recent past. It states, “good infrastructure and proximity to the city led developers and occupiers to believe in the growth potential of these areas. Therefore, while rentals surged, a lot of projects were put under construction in these markets.”

The suburban areas of Thane and Navi Mumbai, which have seen huge projects being planned as land was available at lower rates than in Greater Mumbai, are expected to be hit next by the slump. Commercial rentals in these areas are expected to fall by 30-35 per cent. The commercial business districts are set to be the least affected as they have a low supply. However, since rentals in these hubs have reached unaffordable levels (with a growth rate of 250 per cent), the report predicts a 20-25 per cent correction in such places. These include the CBDs of South Mumbai (Nariman Point, Cuffe Parade, Fort, Ballard Estate) and Bandra Kurla Complex. The report also says the demand for commercial spaces from manufacturing sectors is expected to increase in future.

News Published Under:   Mumbai |

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