Mumbai sees lowest annual office completions in five years

Only 3.69 million sq ft of projects were completed in 2022.

In Q4 2022, Mumbai only had a total of 0.46 msf in new office supply. According to Cushman and Wakefield, the city witnessed limited project completions of 3.69 msf in 2022, far less than the last five years’ average supply (30% decline from the average). 

Majority of the annual supply came in Lower Parel and Thane Belapur Road submarkets. Limited supply addition and healthy leasing translated into a 198 bps drop in vacancy rate to 21.3% and is expected to come down further. 

“We foresee a supply pipeline of ~19 msf over the next three years, 70% of this supply is expected from prominent developers/institutional players. Majority of this supply (2023-2025) is expected in Andheri-Kurla, Powai and Thane-Belapur Road submarkets,” the analyst added.

Here’s more from Cushman and Wakefield:

Yearly gross leasing volumes surpass 2019 peak levels 

Mumbai recorded strong gross leasing volume (GLV) of 4.5 msf in Q4, similar to the figure last quarter but a 50% rise on a y-o-y comparison. This takes the annual GLV value to 15.17 msf, surpassing the pre-Covid level of 13.95 msf in 2019. The second half of the year witnessed considerable traction (around 60% share in annual GLV) with large (100,000+ sf) deals, including both fresh leases and term renewals. 

Compared to the year 2019, sub markets such as SBD BKC, Lower Parel and Thane sub markets have witnessed 1x growth in terms of annual gross leasing volume. In Q4, fresh leasing volume of 2.9 msf and term renewals of about 1.43 msf were recorded, whereas the same for the full year stood at 8.5 msf and 5.6 msf, respectively. Occupiers from BFSI (28%), Professional Services(17%) and IT-BPM (13%) sectors were active during the year 2022. 

In terms of net absorption, the fourth quarter number stood at 2.47 msf, a 1.4x rise on a q-o-q basis and 3.7x jump as compared to Q4 2021, showing a strong revival of demand for the year 2022. 

Rentals largely range-bound for the year 

Overall city wide market rentals haven’t witnessed growth from previous quarter and has remained range bound for the year 2022. Key projects under institutional ownership and prominent developers across all submarkets have witnessed a relative 5-10% increase in rentals given its low vacancy. The city rentals expected to witness growth in coming quarters given the limited availability of superior grade office supply.