Locating a business in Mumbai — the country’s commercial capital — is as expensive as renting an office space in Melbourne and more expensive when compared to Los Angeles. Despite the influence of global headwinds on mainstream business, Mumbai’s office market recorded the country’s highest rent growth during the first six months of 2017, according to a Knight Frank report released on Thursday.
The report — The Global Cities Report for 2018 — revealed that office rentals in Mumbai’s commercial skyscrapers appreciated by 1.8 per cent, which was the highest in the country and the sixth highest globally. In the process, Mumbai’s office market outpaced market spaces in London (0.0 per cent rent growth), Hong Kong (1.1per cent) and Tokyo (0.0 per cent)
The average rent per square feet for office space in Mumbai’s commercial high-rises was $56 per sq-ft (Rs 3663 per sq-ft) per annum during the six-month period, which is the same as the average per sq-ft rent in Melbourne, while the corresponding average rent in Los Angeles was $ 45 per sq-ft.
Dr Samantak Das, the chief economist and national director of research, Knight Frank India, attributed Mumbai’s rent growth to a continual demand and space constraint. While the general slowdown in the economy did cast a shadow on the city’s rental growth — rentals had grown at an average 4.7 per cent during the corresponding period last year — Mumbai still posted a strong growth.
Globally, Toronto recorded the highest rental growth in 2017 at 11.9 per cent, followed by Beijing (7.6 per cent), and Melbourne (4.6 per cent).
Meanwhile, three Indian metros — Bengaluru, Mumbai and Delhi — registered the highest prime office yields among 34 leading international markets. as As per the report, Bengaluru topped the table with 10 per cent yield, followed by Delhi (9.20 per cent) and Mumbai (8.50 per cent).
Delhi has emerged as the most expensive office market in the country, followed by Mumbai.
According to the report, an office space measuring 1.56 lakh sq-ft could be bought in Delhi in $100 million. In Mumbai, the same level of investment would fetch an office space of 1.63 lakh sq-ft.
Bengaluru, meanwhile, had the edge on the count of affordability of office spaces. Bengaluru’s Whitefield emerged as the most affordable tech-hub in the country, with a prime rent of $9.65 per sq ft. Das said, “Whitefield provides sky-high returns, thus incentivising investment.”
In contrast, Gurugram’s Cyber City at $20.40 was more expensive than tech-hubs in Madrid, Seoul and Kuala Lumpur.
Bengaluru is already valued as the most favoured destination on the count of employment and the property cost index.
Mumbai and Bengaluru also feature among the top five future cities, with the report projecting that the average household income ranging between $35,000 to $ 70,000 in these cities in the 2017-2027 period.
In fact, the report forecasts that household incomes in Bengaluru will grow by a high 144 per cent as compared to the current levels during this period. Only Shanghai is projected to record a higher growth rate in this segment.
The rise in household income will also influence the spending patterns, with the report predicting a 177 per cent increase in incomes spent on eating out in Bengaluru, and 136 per cent in the case of Mumbai.