15 Feb, 2017
Among all of Mumbai’s office sub-markets, Navi Mumbai enjoys the largest IT/ ITeS-occupier footprint
The common perception about Mumbai is that though it is India’s financial capital, it has no major Information Technology (IT) presence. Although that is true for the Island City, the Navi Mumbai sub-market more than makes up for Mumbai’s lack of a strong IT footprint. In fact, IT companies are the largest occupiers in low-cost markets like Navi Mumbai – as much as 76% of commercial space in Navi Mumbai is occupied by IT/ ITeS players.
The latest and largest commercial space transaction in Navi Mumbai is testament to this reality. A BFSI player has bought 100,000 sq ft office space in Seawoods, according to newspaper reports. The insurance arm of this player is expected to use this space for setting up its IT centre and back office.
Area leased by different sectors in Navi Mumbai
Moreover, banks’ back offices / data processing centres that fall under the BFSI classification prefer Navi Mumbai, and many operate out of IT buildings. A variety of reasons like this region’s better infrastructure, lower office rentals, connectivity to Mumbai and other areas in Mumbai metropolitan region (MMR) as also a high density of professional and higher education institutes lead to this preference for Navi Mumbai.
In the IT/ ITes value chain, business process outsourcing (BPO) call centres are most sensitive to costs, as they operate on a $1 real estate cost strategy (i.e. the real estate rent of 1 sq ft should not exceed the USD exchange value of INR 65). BPOs are followed by knowledge process outsourcing (KPO) firms and software design firms, which operate on slightly better margins.
In Navi Mumbai, software technology parks of India (STPIs) and IT-special economic zones (SEZs) prove to be very attractive for such IT/ ITeS players due to the inherent benefits in operating out of these. That is the reason behind ~95% occupiers being based out of STPIs and IT-SEZs from the total office stock in Navi Mumbai.
The satellite city proves to be the best possible rental sub-market for this sector. In the future too, this sub-market will continue to have a strong IT footprint even if the rentals were to rise.
Rental values (Grade A buildings) in Mumbai’s top 5 micro-markets