Mumbai office leasing plummets 32% to 3.05msf in Q1

Smaller sized transactions dominated fresh leases.

A report by Cushman and Wakefield reveals that Mumbai’s office property sector recorded gross leasing volume (GLV) of 3.05 msf in Q1, a drop of 32% from a very strong previous quarter and an 11% drop on a y-o-y comparison. 

However, this volume still remains reasonably good compared to the average quarterly volume of 3.5 msf during the last 6 quarters until Q4-22 (the post-Covid office rebound period).

Here’s more from Cushman and Wakefield:

Fresh leases accounted for 1.35 msf in the total GLV. Within fresh leases, the smaller sized transactions (below 50,000 sf) were dominant as opposed to the previous two quarters where large transactions (100,000 SF+) dominated. Occupiers from IT-BPM (38%), BFSI (21%) and Professional Services (18%) sectors were active during this quarter. Emerging segments such as GCCs and Flex space continue to witness traction, and there are enquiries that suggest this momentum to persist. 

Leasing across Lower Parel, Malad-Goregaon and Thane-Belapur Road were active markets capturing almost 60% of the quarterly GLV. The first quarter recorded net absorption of 0.72 msf, which is lower by 25% y-o-y, although it stays nearly in line with the previous 8-quarter average of 0.83 msf. 

No project completions in the quarter; vacancy drops further 

No supply additions were witnessed in this quarter. However, 2023 is expected to see close to 6.16 msf supply, nearly 25% of which has been pre-leased. Limited supply addition and sustained leasing culminated into a 66 bps drop in vacancy rate to 20.4%. We foresee a supply pipeline of ~16 msf over the next three years. The majority of this supply (2023-2025) is expected in Andheri-Kurla, Thane and Thane-Belapur Road submarkets. 

Overall uptick in city rentals witnessed 

Overall city-wide market rentals have witnessed an uptick of 1-2% from the previous quarter. Key projects under institutional ownership and prominent developers across all submarkets is expected to witness rental increase in upcoming quarters, given the low vacancy.With operationalisation of Metro 2A and 7 lines, the rentals are expected to see an improvement in upcoming quarters in sub markets like Malad Goregaon and Andheri Kurla.