Bandra-Kurla Complex loses ground to distant suburbs

A few years back, companies and financial intermediaries made a beeline to shift their offices from Nariman Point in south Mumbai to Bandra-Kurla Complex (BKC) in western suburb of Mumbai, which was developed as an alternative financial hub.

Today, they are moving further down to distant western suburbs such as Malad, Goregaon and Powai. These are the places where they get big spaces at a relatively cheap price.

Chanakya Chakravarti, joint managing director, Cushman & Wakefield, said, "BKC has been too slow in capturing demand due to high prices, low space efficiencies and competition from other suburban locations as Andheri, Powai and Malad."

Countrywide has recently leased an office space measuring about 82,600 square feet at Malad while eFunds leased 70,000 square feet at Powai and eServe leased 1,25,000 square feet at Goregaon.

Other offices which have taken space at Malad are ICICI OneSource (71,200 square feet) and Sutherland Technologies (35,600 square feet).

More than 3 lakh square feet of grade A space (top quality buildings) remains unabsorbed in BKC.

In contrast, over 9-10 lakh square feet worth of space has been lying vacant in grade A properties in Nariman Point. This accounts for about 18 per cent of the total available space in the area.

Sunil Bajaj, a real estate consultant, said that fresh demand for offices in Nariman Point area is low as large technology and financial companies have shown preference for large spaces at lower cost at distant western suburbs in Mumbai.

The net effective occupancy cost in the BKC is now close to Rs 150-170 per square feet per month compared to Rs 141-151 per square feet per month in Nariman Point.

Net effective occupancy cost is arrived at calculating the total cost on property occupancy including lease rentals, taxes and other charges. The cost is Rs 46-50 per square feet at Malad and Goregaon, while at Powai the cost is as low as Rs 27-32. The commercial space rents in Nariman Point have declined almost 25-30 per cent in the last three years.

Joygopal Sanyal, head (western and eastern region) consulting practice at Chesterton Meghraj, added, "BKC has attracted mostly the financial institutions and banks. Apart from these categories, it has not attracted much other sectors."

According to him, the buildings in Nariman Point cannot compete with what the new supplies at Lower Parel, Andheri and Malad offer in terms of efficiency, accessibility, image and price.

Chakravarti of Cushman & Wakefield said small-to-medium size segment (5,000-15,000 square feet) mostly service sectors such as airlines, consulting firms, brokerage houses still prefer the Nariman Point area.