More than 750 office space leases in Mumbai are set to expire in 2016

More than 750 office space leases in Mumbai are set to expire in 2016. According to PROPSTACK, a commercial real estate information and analytics company, the amount involved in the lease renewal, comprising 36 months average duration, will be around Rs 50 crore a month. Although 77% of 750 office space lease renewal are below 5,000 sq ft, the transactions range from as low as 500 sq ft to 2,35000 sq ft.

Sectors like IT-ITeS and BFSI sector continue to dominate the leasing activity in Mumbai. “Mumbai has remained a financial capital hub where IT-ITeS and BFSI companies have continued to dominate the office space take-up. Last year BFSI, manufacturing and pharmaceutical sector played a major role in leasing apart from the technology firms. This trend is expected to continue in 2016 as well,” says Raja Seetharaman, director of PROPSTACK.

Raja acknowledged that the office rentals were at its peak in 2008 and since then the average rentals in key locations of Mumbai across all grade buildings have dropped. “The 35%-40% fall in the average rentals is spurred by softer market conditions and demand dearth in the first quarters of 2015,” he said.

“Office rentals are expected to remain nearly stable with 3-4% increase in certain key locations with low vacancies. However, at a city level, since a lot of large take-ups are happening in peripheral areas, weighted average rentals are expected to remain status quo,” Raja said.

The company further expects brokers to take home over Rs 300 crore a year from the aforementioned number of deals. “Considering that around 30% of renewals will be direct between the existing tenant and the landlord and at an average of 15-30 day brokerage; expected broker earnings just on renewals could vary from Rs 290 crore to Rs340 crore,” Raja observed.

Source: Economics Times