Sakhar Bhavan premises at Nariman Point recently renewed the lease with ABN Amro at a rate of Rs 500 for one sq ft per month.

Over the past one year, a few lease deals have taken place in Nariman Point and Bandra-Kurla Complex (BKC) in the Rs 350-450 a sq ft range, but this is the first time that the Rs 500 mark has been reached.

Pollution, traffic jams, creaking infrastructure, slum sprawls — nothing seems to deter big companies, multinationals and foreign banks from paying astronomical prices for office space in the country’s financial capital. Commercial rentals in other cities usually range from Rs 400 in Connaught Circus, Delhi, to Rs 150-200 in Bangalore to Rs 60-100 in Hyderabad.

The Sakhar Bhavan premises at Nariman Point, which ABN Amro has been occupying for the past several years, are spread over an area of 3,100 sq ft. The rent comes to Rs 1.86 crore a year. Before the renewal of the lease, about two months ago, ABN Amro was shelling out just about Rs 180 for one sq ft for this space. The bank already has a significant presence in Sakhar Bhavan — it occupies almost 70% of the building on different floors since the past eight years. With all its offices under one roof, the bank would has no option but to shell out an astronomical rate for renewal. It would not make any business sense to dislocate a part of its operation and move out. A private investment company that is believed to own the pricey structure.

Real estate observers said this transaction will now be taken as a benchmark for future lease deals in Nariman Point. Until two years ago, 30% of offices here were empty and Nariman Point’s position as the premier commercial business district (CBD) was under threat from upstarts like the Bandra-Kurla Complex (BKC). Today, corporates are willing to shell out phenomenal rates to get a toehold here. But large offices over 5,000 sq ft in size are just not available. In early 2006, corporate houses were forking out anything between Rs 175 and Rs 250 for one sq ft. In 2005, the rate was barely Rs 100 to Rs 135. In Hoechst House at Nariman Point, the rentals were just over Rs 200 for one sq ft about 18 months ago.

Limited new office development has led to a backlog in the market and demand for corporate office space is unlikely to abate in the near future, said observers. Some property experts are, however, sceptical about high lease rentals and wonder if they are sustainable in the long run. The rentals were equally high during the 1994 boom.

Source: Times of India dated 27/8/2007
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  • commercial rentals super vs carpet area

    Hi. I'm from gurgaon. Here in a building , the rental rates are calculated based on super area, not carpet. Therefore, a building costing Rs 150/sq ft can actually have a carpet area that is 50% less than the super area and thus cost 300 rs/sqft for carpet area. Same with maintenance 20rs /sq ft, translates to almost 35-40 in most buildings when calculated on a carpet area basis.

    How does it work in mumbai and bangalore.?
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