Published & Updated as on - 2010-02-25

KOLKATA: For those who believe Kolkata as a business destination has been out of favour after the unceremonious exit of Tata Motors' Nano project in October 2008, a Realty check offers an interesting insight into the reality. Office space rentals in Kolkata remain higher than the more fancied Bangalore, Chennai and Hyderabad. The clear indication is that the business demand is still robust. Only Mumbai and Delhi have more expensive office space.

A study by global realty consultant Cushman & Wakefield revealed that the Burrabazar-BBD-Esplanade area-Park Street belt that comprises Kolkata's central business district (CBD) commands a rent of Rs 98/sqft, way over Gurgaon prime commercial (Rs 77), Bangalore CBD (Rs 73), Pune CBD (Rs 55), Chennai CBD (Rs 55) and Hyderabad CBD (Rs 50).

What's even more surprising is that rents in Kolkata have been least affected by the downturn that sparked a major price correction in the real estate sector across the country. While rent in the city's CBD is down 7% against last year, the rentals erosion elsewhere is 10% to 28%.

But despite the 20% rent correction, office space in Nariman Point, Mumbai's CBD, remains the costliest in the country at Rs 300/sq ft ($107/sq ft/year). It is also the fifth most expensive location globally after Tokyo ($190), London West End ($161), Hong Kong CBD ($160) and Dubai CBD ($120). New York Midtown ($105), Moscow CBD ($102), Paris CBD ($102), Milan CBD ($89) and Zurich CBD ($88) are all cheaper than Mumbai.

Worli follows next at Rs 250/sqft despite a 23% correction. Connaught Place in Delhi at Rs 242/sqft is the next in line followed by again two districts in the western metropolis Bandra-Kurla Complex (Rs 240/sqft) and Lower Parel (Rs 180/sqft). The office space at other CBDs in National Capital Region is in the 151-167 bandwidth followed by Andheri in suburban Mumbai at Rs 110/sq ft.

The rentals at Kolkata's Park Circus Connector (Rs 60/sqft) and Rash Behari Connector (Rs 57/sqft) is higher than the CBD rent of Chennai (Rs 55/sqft) and Hyderabad's Banjara Hills (Rs 50/sqft).

Cushman & Wakefield India executive director (occupier services) Arvind Nandan said: "While the early part of 2009 was a reflection of the economic slowdown mirroring the rest of the world, by the latter part of the year, there were signs of stability and also revival. This is evident from the fact that more established markets like London (-25%) and Hong Kong (-35%) have seen equal or higher rental correction in the same period. Most micro-markets across India started to record stable rentals indicating a gradual revival in demand. This trend is likely to remain constant in 2010, where we expect rental values to remain stable with a strengthening bias across established markets. Locations with a surfeit of IT/ITeS development may, however, experience further softening of rentals in early 2010, albeit at a much lower rate than before."

Rentals at IT/ITeS hub Salt Lake Sector V have already declined by 13% and are now hovering around the Rs 42/sqft mark with possibility of further decline till the sector regains momentum in the second half of the year. Maintaining last year's position within the Asia Pacific region, India captured three of the top 10 spots with Mumbai CBD, Mumbai Worli and New Delhi CBD at third, fourth and fifth positions respectively.

Source: The Times of India 24/2/10