Infrastructure renaissance to boost
demand for premium offices in South Mumbai; Nariman Point set to reclaim its
premier commercial hub status: Knight Frank India
·
South Mumbai projected to add 4-6 mn
sq ft of mixed-use office space in the next 6-8 years
·
Nariman Point’s rents surged by 52% to INR 569
per sq ft from 2018 to H1 2024
Mumbai, October 10, 2024: Knight Frank India's latest report, South Mumbai –
A Renaissance, highlights how ongoing enhancements in transit-related
infrastructure are expected to drive the revitalisation of South Mumbai. These
infrastructure improvements are set to significantly increase the appeal of the
area for both businesses and investors. Notably, office rentals in Nariman
Point, one of the city's most iconic commercial districts, are projected to see
a sharp rise. The report forecasts that top rentals in Nariman Point will
increase from the current INR 569 per sq ft to INR 1,091 per sq ft by 2030,
reflecting strong demand for premium office space in the area.
In the early 2000s, Nariman Point was
Mumbai’s premier business hub, with rental rising steadily from INR 200 per sq ft in 2003 to INR 550 per sq
ft in 2007. However, the global financial crisis and the increasing appeal
of Bandra Kurla Complex (BKC) led to downward trajectory in office rental to
INR 402 per sq. ft. in 2012. By 2018,
Nariman Point’s rental price further depreciated to INR 375 per sq ft,
significantly lower than BKC’s office rental at INR 833 per sq. ft. and NCR’s
office rental at INR 460 per sq
ft.
However,
the top rental prices in Nariman Point appreciated to INR 569 per sq ft by the
first half of 2024, surpassing top rentals of leading central business
districts of both Bengaluru (INR 353 per sq ft) and NCR (INR 429 per sq ft). Between 2018 till H1 2024, top rental rates in Nariman Point have surged
by 52%, significantly outpacing rental growth of BKC, where rents have
grown by 20%. In contrast, top rentals in Bengaluru and the National Capital
Region (NCR) have experienced a decline, dropping by 4% and 7%, respectively. This
increase is not just a recovery from past lows; it also puts Nariman Point
ahead of important commercials markets of Bengaluru and NCR. This
rebound is driven by both an increase in demand for premium office spaces in
traditional business districts and upcoming infrastructure projects that are
enhancing Nariman Point's connectivity and appeal.
|
Rent INR
sq. ft) |
Nariman Point |
BKC |
Bengaluru |
NCR |
|
2018 |
375 |
833 |
367 |
460 |
|
H1 2024 |
569 |
1000 |
353 |
429 |
Source: Knight Frank│ Note: Highest rentals from top-tier
buildings for the respective year have been considered
Shishir
Baijal, Chairman & Managing Director, Knight Frank India, said “South
Mumbai is witnessing a renaissance, spurred by the transformation of strategic
infrastructure across the city. This renewed interest in premium office spaces
is already reflected in rising property prices. The convergence of enhanced
infrastructure and a strong residential market strengthens Nariman Point’s
standing as a premier commercial hub, creating promising opportunities for
investors and businesses alike. As infrastructure-driven economic growth
continues, we expect more companies to be drawn to the area, contributing to
its revitalization and long-term commercial sustainability.”
South
Mumbai’s Fresh Office Supply: Fresh Office Supply: From
Stagnation to Anticipated
South
Mumbai's new office supply is poised for significant growth, with projections
of over 4 million to 6 million square feet of fresh mixed-use space added in
the next 6 to 8 years—three times the supply seen in the past decade. This
upcoming expansion will be fuelled by the redevelopment of vacant land,
including parcels owned by the Mumbai Metro Rail Corporation Ltd (MMRCL), Rail
Land Development Authority (RLDA), old mills, and unused industrial sites that
are now eligible for conversion into modern office spaces. This anticipated
growth in South Mumbai's office market, coupled with major infrastructure
upgrades, could restore the area’s status as a premier office destination.
While Mumbai has continued to solidify its
position as a key office market, South Mumbai has faced challenges in expanding
its office space supply. From 2014 to the first half of 2024, South Mumbai
added 1.6 million square feet of office space, accounting for 3% of the total
office supply in Mumbai during this period.
The limited supply is due to
several factors. The high land costs, along with the scarcity of available
plots in this prime location, have complicated large-scale commercial developments.
Additionally, the existing office spaces, enhanced by renovations and
refurbishments, have been sufficient to meet demand over the past decade.
Recent infrastructure upgrades,
especially in transportation and connectivity, combined with growing interest
from developers, have rejuvenated the South Mumbai office market. Since 2021,
the area has added 0.9 million square feet of office space, exceeding the
supply recorded between 2014 and 2020. The
region's share of Mumbai’s overall office supply also experienced a notable
increase, with 2023 standing out, contributing 20% of the city's total new
office space. This shift underscores South Mumbai’s rising potential as a
key office destination.
Burgeoning
Residential Market of South Mumbai:
South Mumbai’s residential market has seen a
consistent rise in absorption rates, highlighting its increasing attractiveness
as a prime residential destination. Although it represents a smaller portion of
Mumbai’s overall market, South Mumbai
real estate is distinguished by luxury properties and high-end developments. Since 2016, residential absorption in South Mumbai
has surged significantly, surpassing 1,000 units by 2023. This growth is
especially impressive given the challenging macroeconomic conditions. The region's
share of the overall residential market has steadily climbed, reaching about
1.4% in the first half of 2024.
Rising Share of South Mumbai in
Mumbai’s Total Transactions
Source: Knight Frank Research
While other micro-markets like the Central Suburbs
and Navi Mumbai lead in volume, South
Mumbai distinguishes itself through high-value transactions driven by their
heritage, connectivity, and lifestyle appeal. The growth in South Mumbai’s
residential sector reflects not just increased demand for luxury homes but also
a broader transformation that complements Nariman Point’s commercial revival.
As businesses re-establish or expand in South Mumbai, the availability of
nearby luxury residences adds significant value for both employers and
employees. This synergy between residential and commercial growth is essential
to sustaining Nariman Point’s resurgence as one of Mumbai’s top business hubs.
Share of South Mumbai in Total Supply
Rise Post Covid
Source: Knight Frank Research
South
Mumbai’s share of residential supply has seen a marked increase in recent
years. Starting at just 0.2% in 2016, it gradually rose to 1.5% by 2020. The
peak occurred in 2022, with a substantial 4.0% share, primarily driven by
heightened demand for premium housing post-COVID, infrastructure improvements,
and the resurgence of the city’s commercial hub. This elevated share remained
above its decadal average of 1.2%.
Nariman Point’s Timeline
|
Year(s) |
Key Event |
|
1940s |
Reclamation begins, transforming the Arabian Sea
into Nariman Point. |
|
1946 |
Sir Cowasji Jehangir leads the project; named
after Khursheed Nariman. |
|
1950s |
Nariman Point starts developing as a commercial
district. |
|
1960s |
High-rise buildings establish it as a symbol of
corporate power. |
|
1970s |
Becomes Mumbai’s top business district with
soaring real estate prices. |
|
1980s |
Peak demand: iconic buildings like Air India and
Oberoi Towers rise. |
|
1990s |
Infrastructure shows signs of strain; issues with
congestion and aging. |
|
Early 2000s |
Bandra-Kurla Complex emerges, shifting business
focus away from Nariman Point. |
|
2010s |
Loses status as commercial capital; businesses
relocate. |
|
2020-Now |
New infrastructure projects enhance connectivity
and future appeal. |
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