Mumbai: Phoenix Mills Ltd, which mostly builds malls, is planning to more than double its office portfolio to 3.5 million sq.ft in four years, joint managing director Shishir Shrivastava said.
The company owns around 6.5 million sq.ft retail space in seven cities, including Mumbai, Pune, Bengaluru and Chennai. Most of them are malls, built as part of mixed-use development. It also owns around 1.5 million sq.ft of office space at Kurla in Mumbai.
“We want to expand our office portfolio to about 3.5 million sq.ft. It will take about four years to build that kind of space. The office buildings would be built in the existing mixed-use developments," Shrivastava said in an interview.
A mixed-use development may house retail, office and residential spaces within the same project. With this, Phoenix Mills joins large developers such as Lodha Group and Oberoi Realty Ltd which are building office towers to cater to rising demand, even as the residential property market stagnates.
In the nine months ended December, the BSE-listed firm generated around 67% of its revenue from retail business while commercial office accounted just around 4%. Around 30% of its overall revenue came from its hospitality and residential segments.
The new commercial offices would be built across all its existing “retail-led mixed used developments" in Pune, Bengaluru and Chennai.
Phoenix plans to add an office tower at the commercial area at Mumbai’s Lower Parel, where it operates High Street Phoenix mall and St Regis Hotel, Shrivastava said. He did not say how much the company will invest to build these assets, but said it would be funded mostly through internal accruals.
Demand for premium office space is crossing supply in major cities.
According to a 19 February report by brokerage firm ICICI Securities, net absorption of prime office space in 2017 across seven cities including Mumbai, Delhi-National Capital Region (NCR) and Bengaluru stood at around 24 million sq. ft against a supply of around 23.5 million sq. ft during the year. This year, net absorption of office space is likely to touch 28 million sq. ft, the report said.
Besides, the company is also on expansion mode to ramp up its retail business. Last year, Canada Pension Plan Investment Board (CPPIB) said it would invest around Rs1,600 crore in Island Star Mall Developers Pvt. Ltd, a unit of Phoenix Mills. Most of the funds would be deployed before the end of this year in purchasing land to develop malls or acquiring existing retail assets.
“Our rental income in the last financial year was around ₹ 770 crore. Going by the indicators in the last nine months, this year’s rental income would grow at least by around 11-12%," Shrivastava said.