Over 750 Office Space Leases in Mumbai to Expire in 2016

The year 2016 is the year for taking up offices on lease basis. As per research conducted by PROPSTACK, a commercial real estate information and analytics company, the sums involved in the lease renewal, consisting of an average period of thirty-six months, will be approximately Rupees 50 Crore a month. Although, 77% of 750 office lease renewal are below 5,000 sq. ft., the leases range from as low as 500 sq. ft. to 2,35,000 sq. ft.

The Information Technology sector (which includes Information Technology enabled Services sector) and Banking, Financial services and Insurance 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,” said the director of PROPSTACK, Raja Seetharaman. 

He further added that the 35% to 40% decrease in the average rentals is caused by softer market conditions and demand dearth in the first quarter of 2015. The office rentals were at their peak in 2008 and since then the average rentals in prime locations of Mumbai across all grade buildings have fell.

Office rentals will probably remain stable with 3% to 4% rise in certain prime locations with low vacancies. However, at Mumbai, since most of the huge take-ups are happening in peripheral areas, weighted average rentals are expected to remain the same.

The company further predicts that brokers will take home above Rs. 300 crore a year from the abovementioned transactions. “Considering that around 30% of renewals will be direct between the existing tenant and the landlord and at an average of 15-30 days brokerage; expected broker earnings just on renewals could vary from Rs. 290 crore to Rs. 340 crore,” Raja observed.

Looks like it's just the right season for lessees and brokers!
Keywords: Real Estate, Lease, Transfer of Property Act