The commercial rental market in Mumbai is witnessing an upsurge as property prices in the city escalates. This is evident from the fact that there is an addition of over 1.9 million sq.ft of Grade A office space across all micro markets.

Office Space Rentals:
IT / ITES companies have been driving the Mumbai commercial market - especially in the central and northern suburbs, followed by financial service providers and pharmaceutical companies. The demand for office rental space is growing as the IT companies are mostly looking for large, contiguous space of between 10,000 and 30,000 square feet.

One of the reasons behind the stabilizing prices of CBD is for the new and high-quality buildings are being constructed on cheaper development land in the north. So as to say, the SBDs are therefore acting as a brake on rents in the city centre. This also means, however, that rents in the SBD are only slightly lower than those in the CBD.

The demand for offices in the whole market continues to be subjugated by IT companies and this high demand has also led to extensive new development. While 2005 saw the completion of a total of approx.3.2 million sq.ft, amounting to a quarter of the high-quality office space in Mumbai; the net absorption at the same time was around 3.5 million sq.ft.

New developments of 3.5 million sq.ft (approx) and 2.5 million sq.ft (approx.) are projected for 2006 and 2007 respectively and are projected to continue in the next few years matched by an expected increase in demand. Bandra Kurla is the most in-demand area for office space rentals in Mumbai. However, the current trend shows that extensive development activity will result in increased importance for the secondary locations.

The majority of the space planned for 2006 will not be ready until the end of the year. For this reason, further increases in rents are expected during the current year. However, moderate increase in rent is projected in 2007, in view of the extensive new developments coming up in the city. Nariman Point is likely to witness a further strengthening of lease rentals - 5-7 per cent in the next one year due to the steady occupier demand expected in this area. A similar increase is expected in rental values in Bandra-Kurla Complex, as well with strong leasing sentiment prevalent in the area.

Retail space rentals: With the retail boom in India and the fashion capital Mumbai in particular, the construction activity of organized retail space in the city continues to be high. But a recent growth trend has been noticed particularly in the suburban micro markets where the rental values in the suburban malls recorded a 12 per cent increase year on year. While prime high street location of Linking Road has witnessed a five per cent increase in rental values between the first and fourth quarters of the year.

Mumbai has seen some of the best mall space in India and so exceptional are the rental trends. But the last couple of years have witnessed a sort of stabilization of mall rental s in Mumbai. Reports from analysis have shown that mall rentals remained stable in Nariman Point, Vashi, Lower Parel and Malad. However, there are always demand for economically viable projects by credible developers who lay due emphasis on professional aspects like mall mix, and mall management.