Mumbai to see nearly 8m sq ft of new office space this year

Supply is expected to outpace demand by the end of the year.

According to a recent JLL report, about 7.6 million sq ft of office space is scheduled to be completed in Mumbai in 2023. An optimum pace of construction activity is expected, barring any unexpected fresh COVID-19 outbreaks. 

Demand for flex space and managed workspaces is likely to be high as occupiers prefer fully-fitted options to save on costs while gaining flexibility in their portfolio as part of their evolving workspace strategy, the report adds.

Here’s more from JLL:

Demand is expected to be driven by medical technology, health analytics, online education, data centres, gaming, pharma and FMCG sectors. Towards end-2023, supply is expected to outpace demand, leading to an increase in vacancy rates. Capital values are expected to rise faster than rents due to rising investor interest, leading to a compression of yields in key submarkets for quality assets.

Net absorption down by 43% q-o-q and 44% y-o-y

Occupier activity was driven by the BFSI, consultancy businesses and manufacturing/industrial segments. Flex-space operators remained active, in line with growing demand for managed workspaces. However, net absorption of 1.05 million sq ft in 4Q22 was lower than the preceding four quarters as occupiers grew cautious and swirling headwinds impacted decision-making.

Navi Mumbai accounted for the highest leasing activity in the quarter, aided by recent completions. SBD Central and SBD BKC followed, with a few large deals also seen in East Suburbs. A great number of leasing deals were seen in the peripheral submarkets during the quarter. Occupiers continued to look at the hub-and-spoke model for flexibility and lowering RE costs as part of an overall strategy.

Supply addition of 0.6 million sq ft in 4Q22

Kohinoor Square Phase 3 (640,000 sq ft) and Lodha Supremus NCP (164,400 sq ft) in SBD Central, The Palladium (296,254 sq ft) in SBD North, Platinum One (169,400 sq ft) in Navi Mumbai and Tulsi Chambers (197,274 sq ft) in East Suburbs were completed in 4Q22. Edinburgh (840,000 sq ft) was converted to a data centre and was excluded from total stock. Total stock rose to 147.6 million sq ft.

With quarterly net absorption higher than the net increase in stock, the vacancy rate dropped by 20 bps q-o-q to 14.1%.

Rents and capital values record marginal rise

Overall city rents rose marginally in 4Q22. However, rents remained soft in CBD and SBD North, mainly in buildings of average quality and high vacancy levels. A noticeable rise in capital values was seen in the key submarkets of BKC, West and East Suburbs, where vacancy remains low amid a scarcity of quality assets.

While key submarkets and quality buildings continue to see rents remain resilient with an upward growth trajectory, occupiers look for ways to rationalise occupancy costs by either renegotiating, reducing their footprint or relocating to more affordable corridors. Landlords are holding rents steady, but are willing to offer extended rent-free periods or occupier fit-outs.

Note: Mumbai Office refers to Mumbai's overall Grade A market.