Mumbai's BKC Struggles with Office Space Shortage and Soaring Rents
The Bandra Kurla Complex (BKC), Mumbai's most expensive business district, is facing a severe office space shortage as demand continues to soar. Rents have climbed significantly, leading some companies to explore nearby areas such as Kalina, Kurla, Worli,
MumbaiOffice SpaceBkcRentsReal EstateReal Estate MumbaiOct 17, 2024
Many construction projects are still years away from securing occupation certificates (OCs), necessary before tenants can move in, said Vivek Rathi, National Director of Research at Knight Frank. “These vacancy levels continue to drop,” Rathi explained.
Mumbai's town planners began developing 370 hectares of marshland in central Mumbai in 1977 as a replacement for Nariman Point, the country's prime business district at the time. The floodgates to BKC opened with the arrival of banks and the financial sector in the 2000s, with the National Stock Exchange (NSE) opening in 2001. ICICI Bank, Trident Hotel, and Bharat Diamond Bourse joined nearly a decade later. Today, BKC hosts Facebook’s India office, an International Financial Service Centre, and several international investors such as Blackstone, Brookfield, and Sumitomo. The headquarters of the Securities and Exchange Board of India is also located in BKC.
Demand for office space at BKC, conveniently located near the city's airport, has been on the rise. Currently, Japan's Sumitomo Corp. is building an office complex on a three-acre BKC plot it purchased in 2019, but the project is expected to be completed only by 2026-27. Meanwhile, Bengaluru-based Prestige Group is developing 2.79 million square feet of office space in BKC. However, even these additions won't be enough to meet the demand.
“From 2022 to 2023, we saw annual gross leasing volumes of 1.4 to 1.6 million square feet, which includes fresh leases, renewals, and pre-commitments,” said Gautam Saraf, Managing Director of Mumbai and New Business at Cushman & Wakefield. “Against this, new supply has been quite limited. In the last four years, merely 1.5 million square feet of office space got delivered in BKC, leading to a supply shortage while demand remains strong.”
Rents have skyrocketed as a result. Since the March quarter of this year, rentals in Grade A office spaces have increased by 10-12%, according to Saraf. On average, rent has jumped from ₹300 per square foot to ₹400 per square foot in just three years, said Anuj Puri, Chairman of Anarock. The costliest location in BKC is Maker Maxity, commanding nearly ₹550 per square foot.
“As BKC continues to be the preferred destination for front office operations, particularly rental rates are expected to appreciate by approximately 3-5% by the end of 2026,” said Anshuman Magazine, Chairman and CEO of CBRE, a real estate consultancy.
The space shortage and steep rents have led some companies to exit BKC and explore neighboring areas. “Many companies, whose lease tenure has come to an end, are moving to the periphery of BKC, in areas like Kalina and Kurla,” said Puri. “It doesn’t make sense for them to stay here because it has become too expensive. Newer companies that can afford these rents are moving in, creating a churn.”
Worli and Lower Parel are emerging as the next major corporate districts in Mumbai, noted Domnic Romell, President of Credai-MCHI, the apex body of builders in the Mumbai Metropolitan Region (MMR). “With well-established infrastructure, excellent connectivity to key areas like Nariman Point, BKC, and the suburbs, these areas are becoming increasingly attractive to corporates,” Romell added.
South Mumbai offers a more affordable alternative, with average rentals at nearly ₹230 per square foot per month, said Vimal Nadar, Head of Research at Colliers India. “Key transit-oriented infrastructure projects, including the Mumbai Trans Harbour Link (MTHL), Coastal Road Project (CRP), and the recently opened connector bridge, have significantly reduced travel time and enhanced connectivity in South Mumbai,” Nadar explained. “Once Line 3 of the Mumbai Metro connecting Aarey and Cuff Parade is operational, South Mumbai will see enhanced connectivity with areas like Central Mumbai, Bandra, and SEEPZ, making it more appealing to leading occupiers.”
There is also growing interest in northern areas like Goregaon and Oshiwara, as well as Nariman Point, Mumbai's southern tip. However, the revival of Nariman Point is still far off, with around four to six million square feet expected to be available in the next four years, according to Rathi. Although there is limited scope for greenfield development, redevelopment projects can help enhance supply. “More than 95% of Grade A office buildings in the area have potential for redevelopment,” Nadar noted. However, redevelopment in Nariman Point is challenging due to fractional or strata ownership of buildings.
“Redevelopment in strata owner assets is always difficult as you have to make everyone agree to the redevelopment,” said Saraf. Many buildings in the area operate under the Pagdi system, where tenancy rights can be purchased and transferred but only with the landlord's consent, making redevelopments costlier.
While there is heightened demand for office spaces, especially from banking and financial services, pharmaceutical majors, social media firms, and co-working entities, the scope for another area to replace BKC’s connectivity and premium location is limited. “It takes decades for corporate districts to come up,” Rathi pointed out. “In the next 10 years, I would say not more than one central business district (CBD) will be added to this market.”
Frequently Asked Questions
What is the current office space vacancy rate in BKC, Mumbai?
The current office space vacancy rate in BKC, Mumbai, is down to a record low of 3-4%, compared to 13-14% four years ago.
What are the average rents in BKC, and how have they changed in recent years?
Average rents in BKC have increased from ₹300 per square foot to ₹400 per square foot in the past three years. The costliest location is Maker Maxity, commanding nearly ₹550 per square foot.
Which areas are emerging as alternatives to BKC for office space?
Kalina, Kurla, Worli, and Lower Parel are emerging as alternatives to BKC for office space due to their excellent infrastructure and connectivity.
What is the potential for redevelopment in South Mumbai?
South Mumbai offers a more affordable alternative with average rentals at nearly ₹230 per square foot. Key infrastructure projects are enhancing connectivity, making it an attractive option for companies.
What challenges are faced in the redevelopment of Nariman Point?
Redevelopment in Nariman Point is challenging due to fractional or strata ownership of buildings and the Pagdi system, which makes redevelopments costlier and more difficult to coordinate.
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