With its gleaming office buildings and impressive residential towers, the Bandra-Kurla Complex (BKC) has toppled the old central business district (CBD) in Mumbai to become the top spot of business activity, says a new report.
“New developments in the (old) CBD were restricted by the unavailability of land and the older buildings were in disrepair — a majority of office buildings in Mumbai’s CBD are at least four decades old with run down structures arising from poor maintenance” says a report released JLL. The declining appeal of the CBD for occupiers is further reflected in falling rentals and occupier shift, says the report titled Futureproofing 2.0 – Upgrading Commercial Assets to Create Lasting Value.
“The stock of Grade-A office space in the CBD has remained stagnant while that in the SBDs, suburbs and peripheral markets grew rapidly. With submarkets like BKC, BKC Fringe and SBD North, saturating in terms of land availability, the supply of Grade-A office spaces in the next five years is mainly concentrated in the peripheral submarkets,” says the report.
Navi Mumbai accounts for 37% of the upcoming supply in the city over the next five years, mostly for IT/ITeS occupiers.
50% stock in Mumbai’s office space is Grade-A office space
In Mumbai, the quantum of existing Grade-A office stock that was completed 10 years back stands at 43.8 million sqft. In terms of number of buildings, this is 50% of the total stock in Mumbai.
Mumbai presents a Rs 2,610-crore investment opportunity
The investment potential in upgrading Grade-A buildings in Mumbai is a whopping Rs 2,600 crore, with a payback period of around three years. Such upgrade involves various components ranging from safety and security to human experience and technology. The need for upgrade and the importance of its various components vary across the city. More importantly, the required capex depends on the building in question and its location.
| Submarket | Investment Opportunity
(Rs crore) |
| BKC | 330 |
| BKC Fringe | 130 |
| CBD | 480 |
| East Suburbs | 290 |
| Navi Mumbai | 190 |
| SBD Central | 200 |
| SBD North | 360 |
| Thane | 30 |
| West Suburbs | 600 |
| Total | 2,610 |
Source: JLL Research
“Out of the total upgrade potential of over 40 million sq ft, BKC, CBD and West Suburbs markets will remain the key drivers. The human centric design elements of an upgraded office space with better aspects like operational efficiency, operating costs, technology, community, sustainability and wellness, safety and compliance, make them more appealing for not just the young workforce but instantly heightens the opportunity for investors to retain their clients, increase rentals and enhance their asset value,” said Aditya Desai, executive director and Head of Developer, Investor Services for India at Projects and Development Services (PDS), JLL.
Rental escalation of up to 40% possible
With the required capex for upgrade varying across submarkets, the potential increase in rentals depend on factors such as planned infrastructure development and proximity to residential neighbourhoods that influence the attractiveness of the submarket to occupiers. The BKC, which is a highly sought- after office destination, offers the maximum scope for rental escalation while peripheral submarkets like Thane offer very limited upside.
BKC offers maximum rental escalation
| Submarket | Rental range
(Rs psf) |
Rental escalation range post upgrade |
| BKC | 165-365 | 15%-40% |
| BKC Fringe | 115-190 | 10%-25% |
| CBD | 145-230 | 10%-30% |
| East Suburbs | 70-125 | 12%-25% |
| Navi Mumbai | 40-100 | 10%-25% |
| SBD Central | 145-240 | 10%-30% |
| SBD North | 80-140 | 10%-30% |
| Thane | 50-75 | 8%-12% |
| West Suburbs | 75-150 | 12%-30% |
Source: JLL Research
It is clear that most buildings in the CBD need to be upgraded to remain attractive to occupiers. While the West Suburbs provide the maximum investment potential in upgrade, BKC delivers maximum upsides to office asset owners with rental escalation. With a combined investment opportunity of more than INR 1,400 crores, these three submarkets are the most prominent options for investors looking to capitalise on the upsides of upgrade.
Housing News Desk is the news desk of leading online real estate portal, Housing.com. Housing News Desk focuses on a variety of topics such as real estate laws, taxes, current news, property trends, home loans, rentals, décor, green homes, home improvement, etc. The main objective of the news desk, is to cover the real estate sector from the perspective of providing information that is useful to the end-user.
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