Citibank recently rented space in Mumbai's premier business district Nariman Point for an eye-popping Rs 550 per sq ft, the highest so far in the area. The rates last year were in the range of Rs 225-250 a sq ft.
A top foreign merchant banker has rented two floors (70,000 sq ft) on Worli's CJ building for a hitherto unheard of Rs 400 a sq ft. Worli has seen rents jump from Rs 175-200 a sq ft last year to Rs 300-400 this year.
In the heart of Mumbai's mill land, Ajay Piramal's Peninsula Towers commands a rent of Rs 350 sq ft, while the tony Bandra-Kurla complex commands Rs 300 a sq ft, up from last year's Rs 180-200 a sq ft.
Office rentals in Mumbai are going over the top indeed. Even suburban localities like Goregaon have seen rentals going up by more than 100 per cent, from Rs 75 a sq ft last year to Rs 175 this year.
Says real estate broker Gopal Maheshwari, "We used to show a property to four or five clients a week last year before a single deal clicked. But today, everybody who is shown a good building at a good location wants to sign up."
In fact, a top foreign bank, which is looking to buy 150,000 sq ft of space in Andheri, has not been able to find space yet.
The boom in commercial rentals is being fuelled by demand from foreign fund houses setting up offices in India and legal firms looking for a piece of the country's financial services sector pie. Maheshwari adds that most of his clients fall into either of the two categories.
A report by real estate consultancy firm DTZ points out that additional demand has come from telecom and IT companies which, along with the financial sector and insurance companies, account for as much as 90 per cent of the demand for commercial space in the city.
At Nariman Point, Bandra-Kurla, and Worli, only two-three per cent of office spaces are vacant, compared to 10-15 per cent last year.
The reasons for the steep rise include lack of fresh supply, the rising cost of money, and the higher yields expected by investors, says developer Vicki Oberoi.
"There is no fresh supply in the market and whatever is under construction is not going to be ready for at least another year," he adds.