Marking the first big transaction of this year in the commercial real estate segment, Tata Group’s retail arm Trent Ltd has acquired 5 floors of office space at Lodha Developers’ recently completed office building Lodha Excelus at New Cuffe Parade in Central Mumbai.
Four of these floors have in fact been purchased by Trent on an outright basis, while the fifth one has been picked up on lease for a long term of 25 years. The deal is valued at about Rs 300 cr for a total 150,000 sqft leasable area.
Trent operates retail chain Westside, Landmark, a family entertainment format store, and Star Bazaar, a hypermarket chain which is a joint venture with UK’s supermarket chain, Tesco. The newly acquired space is expected to house consolidated offices of these brands.
Rental for the floor picked up on lease is set at Rs 125 per sqft a month. The lease contract includes a clause with 15% rental escalation every three years.
“Over the last 3 years, we have been focusing on building a significant rental business through office, retail and warehousing projects. We have numerous completed assets and a significant amount under development which will be completed over the next 3 years, giving us an annuity business worth over Rs 15,000 cr,” said Abhishek Lodha, MD, Lodha Developers, while confirming the transaction.
Trent has picked up space in the first completed office building spread over a leasable area of 8 lakh sqft at New Cuffe Parade. The company has started work on the second office building of around 1.1 mln sqft. Lodha Developers has total 2.5-3 mln sqft office space planned across three towers including the first completed tower.
According to industry experts, the deal indicates occupiers’ rising interest in upcoming commercial localities on Mumbai’s eastern shore.
“Over the past two years, prime office supply in Mumbai has dwindled and prime office vacancy levels have declined to single digit, pushing ready properties’ premium upward. All the connectivity that has come up over the past couple of years has been a game changer for the eastern localities, including Wadala,” said Ramesh Nair, CEO and Country Head, JLL India.
Property consultants also highlighted the rental and outright cost-arbitrage between Bandra-Kurla Complex and the proposed business district at Wadala as one of the reasons for conclusion of this large office space transaction in this area.
The Mumbai Metropolitan Regional Development Authority (MMRDA) has already approved a proposal to transform Wadala into a business district. According to reports, the government is planning to carry development on 158 acres out of its total 269 acres land here.
India’s office property market continued its growth momentum, establishing 2018 as the best performing year historically with absorption recorded at 46.8 million sq ft led by sustained occupiers’ interest in leasing more space.
The Indian office space market achieved record transaction levels in the second half of 2018 as well as for the full year with 12% rise, showed data from Knight Frank India. Commercial office leasing activity in Mumbai was recorded at 5.1 million sq ft in the second half of 2018, registering a 14% on-year growth. Mumbai saw leasing activities to the tune of 7.9 million sq ft in 2018, reflecting a growth of 5.4% over last year.