Mumbai: The decision of Zepto, the rapid grocery delivery start-up, to relocate its headquarters from Mumbai to Bengaluru has had notable repercussions, particularly on Mumbai's commercial real estate sector. According to real estate experts, it has led to a noticeable decline in demand for rental spaces, particularly in shopping malls where the start-ups had a significant presence.
Shopping malls in Mumbai, which have been grappling with the aftermath of the Covid-19 pandemic, are now facing an additional challenge. The reduced demand for rental spaces is aggravating the vacancy rates in these commercial properties. Many landlords and property managers are finding it increasingly difficult to attract new tenants.
According to the Chairman of NAREDCO, Dr Niranjan Hiranandani, “The increase in commercial property rentals can be attributed to the high demand for prime locations in Mumbai where infrastructure, connectivity, talent availability, and business ecosystem is developed. E-commerce has created a major hub for logistics and warehousing centres in the city, which has led to an increase in commercial space rents. The city has also seen an increase in the demand for large commercial spaces from non-IT sectors, which has fuelled lease demand in Mumbai corridors. As a result, some companies may re-evaluate their leasing strategies.”
Agreeing to the trend, President of CREDAI-MCHI, Domnic Romell said, “High rentals in Mumbai, especially in malls, significantly impact businesses. According to CREDAI-MCHI's 2023 report, commercial real estate premiums in Mumbai are 25 times higher than in Delhi NCR and 76 times higher than in Hyderabad. These exorbitant costs make it challenging for businesses to sustain and grow, leading to a notable migration of firms to more affordable cities, thereby affecting Mumbai's economic dynamism.”
Quoting an industry report, the Chief Operating Officer of The Guardians Real Estate Advisory, Saurabh Phull said, “The commercial real estate sector in Mumbai has experienced a surge of over 20%. This increase is attributed to several factors, including the availability of new office spaces with superior construction and high-end amenities. Such premises command a higher premium as businesses seek locations that facilitate talent acquisition, driving strong demand for high-quality office spaces.”
“Mumbai, as the financial capital, is renowned for its high economic standing and scarcity of available space, naturally making it a premium market for real estate. The demand for prime office locations in Mumbai underscores its status and economic significance. However, businesses are increasingly evaluating cost efficiencies and strategic advantages offered by other cities, leading to a trend of relocations. While Mumbai's market remains robust, this trend highlights the need for flexible and innovative real estate solutions to support evolving business environments,” Phull added.
Co-Founder of PropFina, Nitin Singhal feels, “Post-Covid, Mumbai's rising commercial rentals are accelerating a shift in the business landscape. High rents in prime locations are pushing businesses to peripheral areas, and consumers, already habituated to online shopping, are further driving this shift. Malls are increasingly hosting premium brands, while mid-range retailers adapt with pop-up stores or relocate to more affordable high streets, reflecting a fundamental change in retail dynamics.”
