Knight Frank, Real Estate Advisor
MUMBAI: The realty sector slowdown and lack of business confidence have brought Mumbai down to the 10th position this year, among the top 15 global cities, in terms of office rentals, a recent Knight Frank survey report released today said.
The 15 cities surveyed are San Francisco, Madrid, New York, Singapore, Sydney, Washington, London, Mumbai, Tokyo, Mexico City, Paris, Hong Kong, Houston and Frankfurt.
According to the Knight Frank survey report, Mumbai which ranked sixth among global cities in 2007, slipped to the 10th position in 2014 mainly due to delayed revival of the Indian economy and lack of business confidence.
"Delayed revival of the Indian economy and lack of business confidence took a toll on the Indian office market. This had led to Mumbai slipping from the sixth to the 10th rank in terms of rental ranking of global cities between 2007-14.
"While rental decline has been the primary reason, a depreciating rupee added fuel to the fire," Knight Frank Chief Economist and Director of Research Samantak Das said in the report.
Among the top 15 global cities, office rentals in Mumbai are lowest at Rs 250 per square feet per month, compared to London and New York which stand at Rs 900 square feel and Rs 360 per square feet respectively, the report said.
However, the report claimed that going forward, the city's office rentals are expected to grow by nearly 15 per cent over the next five years due to "improved sentiment," the report said.
According to the report, current vacancy levels within the Mumbai office market lies at 23 per cent, which is the highest, as compared to the top 15 global cities.
However, rental yields within the city's office market, is the highest, at 10.3 per cent, as compared to cities like Sydney, Washington and Shanghai, which offer rental yields of 6.3 per cent, 6.2 per cent and 6 per cent respectively, it said.
"Technology and infotech sectors have been key drivers of the take-up of office space in Asia. Financial services and banking, the sectors which led the pre-global financial crisis boom, continue to be more cost conscious. While there is still demand from these sectors, there has been less front or prime office demand," Knight Frank Asia Pacific Head of Research Nicholas Holt said in the report.
However, in the coming years, financial services and banking occupiers to return to drive sizeable segments of demand, he said in the survey report.