Mumbai is the third most expensive city in the Asia-Pacific region in terms of occupancy costs.
Tokyo tops the list, and Hong Kong ranks second. Globally, Mumbai is the eighth most expensive city.
The ranking is based on the latest CB Richard Ellis survey on global market rents in 2002. London continues at the number one slot, followed by Tokyo and Paris.
The survey on global market rents tracks the occupancy costs of prime office space worldwide, and ranks them according to the per-square-feet cost of prime space.
In London, the world's most expensive city, annual occupancy costs amount to $148.73 per square feet. In contrast, Mumbai's prime space has been valued at $57.91 per sq ft.
Prime space in New Delhi is cheaper at $39.92 per sq ft. Delhi ranks 33rd globally, after Seoul ($51.04 per sq ft), Taipei ($43.94 per sq ft) and Beijing ($41.81 per sq ft).
The cost of prime space plays an important role in a company's decision to set up offices. This partially explains why several multinationals have preferred to set up offices in New Delhi rather than in Mumbai.
Although lower property costs is a factor in finalising the choice of destination, the main saving comes from the much lower staff costs, stated the survey.
In Tokyo, the second most expensive city, the cost of setting up an office ranges between $122.24 and $136.13 per sq ft.
Hong Kong works out cheaper even though it is the one of the most densely populated cities in the world. Office rentals cost $61.23 per sq ft in prime space Hong Kong.
Mumbai is much cheaper at $57.91 per square foot but slightly more expensive than Dublin, Ireland ($57.71 per square foot) and Seoul, Korea ($51.04 per square foot).
Encouraging signs of economic recovery in most parts of the Asia-Pacific region have triggered greater interest by corporate clients overseas in rental space in the region.
According to CB Richard Ellis: "The stand-out performers will again be China, followed closely by South Korea and India."
Rentals of office space across the Asia-Pacific region have fallen in the last six to 12 months. In Mumbai the fall was over 11 per cent, whereas in Delhi, the fall almost touched 13 per cent.
Chinese office markets have been the only sustained exception to this trend, supported by significant economic growth, coupled with a very strong outlook, stated CB Richard Ellis survey.
The return of confidence in terms of sustained US economic growth will provide the necessary conditions for rents to grow once again.
This confidence will feed demand for goods and services in the Asia-Pacific region, and thereby push demand for office space in the region.
"The largest fall in rentals has taken place in markets heavily exposed to information technology, telecommunications and global trade -- most notably Hong Kong and Singapore," company officials stated. Rentals fell by over 25 per cent in Hong Kong and by 22 per cent in Singapore.
