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23 September, 2014 15:49 IST
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Source: rss (23-Sep-14)
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Mumbai's commercial office space market has been consolidating over the four quarters ending Q2 FY 2013 (July -September 2012) and showing signs of bottoming out, according to Knight Frank Research.

However, corporate activity which had been fairly stable weakened due to a sluggish global and local environment, resulting in a significant fall in office space take-up during Q2 FY 2013. Rent and vacancy levels that were observed to be firming, again experienced downward pressure as the demand supply gap widened further, it said.

Transaction activity tends to be concentrated in the first half of the financial year as expansion plans are inclined to be executed in that period. However, transaction activity fell nearly 23% in Q2 FY 2013 compared to the same quarter last year and 19% compared to the preceding quarter.

Approximately 0.96 mn.sq.ft. was transacted in Q2 FY 2013 which saw investment activity in terms of outright sales also recede considerably over the previous reference period.

The BFSI sector has been the primary driver of the office space market in Mumbai and it accounted for approximately 0.36 mn.sq.ft. in Q2 FY 2013. Banks and non-banking finance sector companies from the BFSI pack such as SBI mutual fund, Development Credit Bank and HDFC Bank were among the companies active during this quarter.

The market share of the other service sector companies like media, telecom, consulting and logistics has risen consistently and on occasion eclipsed that of the BFSI and IT/ ITeS sectors over the past two years.

However, Q2 FY 2013 saw a drastic drop of this sector's share of the transactions pie. The other service sector companies took up approximately 0.18 mn.sq.ft. during Q2 FY 2013, less than half the number they clocked in Q2 FY 2012.

The IT/ ITeS sector has maintained a steady market share over the trailing three quarters and accounted for 0.18 mn.sq.ft. in Q2 FY 2013. However, worries over an uncertain global economy and the looming threat of sanctions being imposed against outsourcing have hampered expansion activity of the IT/ITeS industry. IT/ITeS sector companies showed a marked preference for the large format office spaces available in Vikhroli, Andheri (E), Powai and Rabale in Navi Mumbai during Q2 FY 2013.

The manufacturing sector has gained significant ground in the preceding three quarters as its share has grown from 14% in Q2 FY 2012 to 26% in Q2 FY 2013. The bulk of the space transacted by this sector was concentrated in Andheri (E) and the Bandra Kurla Complex. Cipla, KGK Diamonds, Kone Lifts and Castrol were among the manufacturing companies active during Q2FY13.

''Thane and Navi Mumbai in the peripheral business district accounted for nearly 0.10 mn.sq.ft., most of which was taken up by the IT/ ITeS sector,'' the report said.

''Market activity will continue to be muted over the next four quarters as the market bottoms out. Corporate expansion activity especially in the IT/ITeS sector is expected to be subdued in the coming quarters following Nasscom's downward revision of the growth estimates for the sector at 11%. Supply should continue to outstrip demand thereby ensuring that rental growth is restricted,'' Knight Frank Research said.

The Alternate Business District will continue to attract market players as the CBD slowly loses its sheen. The central government's focus on the manufacturing sector's growth will likely see its appetite for office space trend upward, it added.

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