BENGALURU/MUMBAI: Global investors are chasing prime office assets in Mumbai’s Bandra-Kurla Complex (BKC), causing a bright spot in India’s real estate market where home sales continue to stay weak.
Developed since the 1990s, the business district is finally outshining south Mumbai’s Nariman Point and the more recently developed Lower Parel, which is facing infrastructure and traffic challenges, said property experts.
This year, the commercial hub saw some top-dollar deals such as Blackstone Group Lp’s purchase of the One BKC office building for ₹2,500 crore. Also, Blackstone-backed K Raheja Corp. is set to buy Citibank India’s former headquarters for ₹395 crore. K Raheja pipped South Korea’s Mirae Asset Global Investment for the 130,000 sq. ft asset.
“BKC is a destination which the government has promoted as a finance centre for a long time. It has established itself as a destination with modern office buildings," said Ankur Gupta, senior vice president of Brookfield Asset Management. “A global trend is that wherever there are modern office buildings coming up, you will see companies rushing to those places. Proximity to the airport and being strategically connected to the rest of the city make commercial sense for BKC."
In 2018, Canada’s Brookfield Asset Management bought the 1.25 million sq. ft Equinox Business Park at BKC from Essar Group for ₹2,400 crore.
To be sure, most investors in Mumbai’s BKC, like in other cities of India, are scouting for ready income-generating assets with top-quality tenants. Demand for land parcels is still limited.
In June, Tokyo-based Sumitomo Corp. offered ₹2,238 crore for a three-acre plot in BKC, or ₹745 crore per acre, in one of the largest land deals in recent times.
It was the sole bid received by the Mumbai Metropolitan Region Development Authority (MMRDA), which handled the auction. MMRDA did not receive a single bid for two other plots on offer.
“We have another 10 hectares left in BKC, but the market is down and local developers are not willing to spend on buying land. We will wait for the right time," said a senior MMRDA executive, requesting anonymity.
Meanwhile, the supply of office space at BKC is fast drying up. Property advisory JLL said vacancy in prime office buildings at BKC has dropped from 13.4% in the fourth quarter of 2017 to 5% in the first quarter of 2019. This has led to an increase in rentals for quality assets. Lease contracts at the high-end Maker Maxity building have risen to ₹415-425 per sq. ft from ₹390 per sq. ft in the fourth quarter of 2018, showed JLL data.“BKC has gradually become a prestigious destination from an office market perspective in recent years. It is well connected and with additional infrastructure coming up, it will be on a par with other international business districts down the line," said Karan Sodi, managing director (Mumbai) of JLL India.
Shobhit Agarwal, managing director and CEO of Anarock Capital, said that while Lower Parel showed a lot of promise as a new business district and has good office buildings, it is saddled with poor infrastructure.
“Just like Nariman Point had seen an exodus of companies moving northwards in Mumbai, we are now seeing firms moving out of Lower Parel to BKC," said Agarwal.
Sunteck Realty Ltd, which has luxury residential projects in BKC, is now developing 2-2.5 million sq. ft of office space in the vicinity. Sunteck chairman and managing director Kamal Khetan said the strategy is to build, lease and own these assets.