MUMBAI: The city's second-biggest ever office purchase marks stunning recovery from lows for its beleaguered commercial property market and may portend a period of rapid growth amidst rising demand and shrinking inventory.
In one of the largest front-office transaction, Essel Group, widely known for its media and entertainment business Zee Entertainment Enterprises, has acquired 2.20 lakh square feet commercial space in Marathon Futurex complex at Lower Parel in Mumbai for overRs 400 crore, said two persons familiar with the development.
The group will be shifting headquarters from Worli to this new office spread over top seven floors of Marathon Realty's tower II. "Essel Group has identified certain premises in Marathon Futurex at Lower Parel. This is still under process," said Mukund Galgali, Executive Vice-President, Essel Group, in response to ET's email query.
The transaction assumes significance as it signals a dramatic recovery for Mumbai's commercial property market after three years of sluggish growth. A dull show in the first two quarters of the year was more than offset by a sale plus lease of 1.8 million sq ft in the third quarter alone. This is half of total nine month sales plus lease of 3.6 million sq feet concluded in Mumbai.
Both capital values and lease rentals for office spaces have been weakening across the country for over three years now. But optimism about the new government's economic programme has prompted buyers to take advantage of the weakness in the commercial property market. Purchases on outright basis and long leases have climbed in recent months as prices continue to be competitive and easing of inventory levels for commercial spaces, said property consultants.
The Zee deal is also a major vote of confidence for Lower Parel, Worli and Prabhadevi localities which have emerged as competitors to BKC as a business district despite transport bottlenecks and flooding problem during the monsoons.
This is the second largest outright commercial space transaction based on both area and value terms after Citigroup's purchase of 2.97 lakh sq ft in Bandra-Kurla Complex more than two years ago. Most office transactions including the Goldman Sachs and Flipkart's deals in Bangalore, have since been concluded on a lease basis.
"The deal was signed and concluded recently. Fit outs and interiors work has also been commissioned and Essel Group is expected to shift its headquarter by the end of next quarter," said one of the persons mentioned above.
An email to Marathon Realty did not elicit any response. Transaction advisor JLL India declined to comment. Currently, these three areas (Lower Parel, Worli, Prabhadevi) have office space stock of 11 million sq ft. Of this around 1 million sq ft is available now as inventory against 4million sq ft three years ago.
"Commercial market has shrugged off the sluggishness witnessed since last three years. Enquiries have gone up and deals are taking place smoothly particularly after June since when the new stable government was formed," said Rajiv Jain, a broker operating in south and central Mumbai.