J Kumar Infraprojects Ltd, the listed contracting firm with several urban infrastructure development projects in Mumbai, has leased 81,588 sq ft on the second, eleventh and twelfth floors in Crescenzo, a prominent commercial office building in Bandra Kurla Complex. J Kumar shall pay around INR 37 crore annually to Parinee Developers Private Limited, the owners of the premises for a period of 3 years, including a six month rent free period. This translates to gross rents of INR 375 psf pm, inclusive of property tax and common area maintenance charges.
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The space is a part of the earlier floors leased by Parinee Developers to Sahara group (Aamby Valley) in 2012 & 2013. However, Sahara left the premises in mid-2015 without completing the term, probably due to the legal and financial troubles faced by the organisation.
The building stands on a 2.22 acre plot which Parinee reportedly acquired from MMRDA (Mumbai Metropolitan Region Development Authority) on an 80-year leasehold basis in July 2006 for INR 536 crore. It received Occupancy Certificate from MMRDA in March 2012, and has a total built-up area of 722,365 sq ft constructed over two levels of basement, ground and 19 floors above ground level. Standard Chartered Bank currently owns nearly half of the building.
The high rent substantiates the fact that the premium office market in Mumbai is buoyant with high demand chasing low availability of quality space, particularly of larger floor-plates. However, after Sahara vacated last year, it took Parinee more than a year to get part of the space leased, indicating the long search time for tenants and landlords alike.
Among the premium office complexes, Maker Maxity continues to remain the preferred destination for office occupiers in BKC, where Mastercard, Mattel Toys, Qatar National Bank & Apple recently leased between 8k-15k square feet each with gross rents falling in the range of INR 315-380 psf pm. Among the four tenants mentioned above, three tenants ended up paying security deposits of more than 12 months. This trend of high security deposits further adds to the effective occupancy costs being incurred by the tenants.
At CRE Matrix, we project the demand for office space in BKC to remain high, and rents to continue facing upward pressure, in the absence of quality supply of office space. The last Grade A building to be constructed in the premium financial district of Mumbai was One BKC, a 1.5 million sq ft office building developed by Radius Developers that became operational in 2015. While Wing B and C at One BKC has been sold by the developer to investors and occupiers, Wing A comprising 0.6 million sq ft of chargeable area is nearly 90% leased to prominent tenants such as Bank of America, Trafigura, Cisco, ICICI Prudential, Amazon, Dimension Data, State Street, Facebook, ICBC, Swiss Re, EMC, Moneygram, Brookfield and ICICI Prudential. Further office supply in BKC is expected from the Godrej BKC, Reliance Convention Centre and Adani Realty’s Inspire BKC that will become operational in the next 6-12 months.
With a cluster of occupants headquartered within a district, the “network effect” is bound to lead to further demand for premium office space. Heightened activity in the financial hub of the country will keep the office market in the Bandra Kurla Complex the space to watch out for.