Mumbai office net absorption up 10% to 2.5msf in Q1

Thanks to a large pre-commitment deal.

According to Cushman and Wakefield, the first quarter of 2024 continued to witness a steady gross leasing volume (GLV) in Mumbai of 4.78 msf with a marginal 8% dip from the previous quarter but a 57% jump from the same period last year. 

In terms of the nature of deals, fresh leasing activity drove quarterly GLV with 49% share, followed by term renewals with a 43% share. 

Here’s more from Cushman and Wakefield:

Within sectors, the BFSI (28%), Professional Services (24%) and Engineering & Manufacturing (20%) drove GLV activity during the quarter. Submarkets of Thane Belapur Road (27%), Malad Goregaon (17%) and BKC (12%) witnessed higher concentration of quarterly GLV, with fresh space take up driving the suburban/peripheral submarkets and term renewals seen dominant in the prime submarkets. 

In terms of net absorption, the Q1-24 recorded 2.47 msf, 10% rise over previous quarter and 2.4x jump from same period last year. This was majorly driven by a large pre-commitment deal going live this quarter in Malad Goregaon submarket, besides good fresh leasing activity seen across the city. 

City vacancy falls sharply on the back of a major deal 

The quarter also witnessed project completions of close to 1.35 msf, 30% higher than that seen in previous quarter. Close to about 7.6 msf of total supply is expected to be completed, largely concentrated (60% of annual supply) in suburban markets of Andheri Kurla and Malad Goregaon. The supply pipeline continues to remain healthy with close to 26.5 msf cumulative supply expected between Q2-2024 to 2026. 

Despite new supply during the quarter, overall city level office vacancy witnessed a 122 bps drop to 17.23%, largely triggered by a sizeable pre-commitment deal going live in new supply and steady fresh demand in a supply constrained micro market. Despite substantial supply in suburban submarkets in 2024, the overall city vacancy is expected to remain rangebound. 

Infrastructure upgrade to potentially boost rents in select submarkets 

City-wide market rentals have seen a slight uptick of 4.3% on q-o-q and 6% on y-o-y basis. Submarkets such as Powai, Malad Goregaon and Worli witnessed a strong annual growth of 11-12% given the steady leasing activity in superior-grade assets. With a healthy demand outlook and a drop in vacancy, the city rentals may improve across some key sub-markets. 

The commercial corridors in submarkets like Andheri Kurla, BKC and Western Suburbs are likely to witness rent uptick, receiving a boost from the soon-to-be-operational Metro Line 3 (Phase I) and also its integration with current operational Metro Lines of 1 and 7.