Mumbai Expected to See 7.0 Mn Sq Ft Grade-A Office Space in 2023

BY Realty Plus

As the return of employees to workplaces continues, Mumbai is expected to maintain a steady momentum in 2023, similar to 2022. According to the latest report by International real estate advisory firm Savills India, it is estimated that 2023 will see around 7.0 million square feet of Grade-A gross absorption.

Outlook for Mumbai office market is the BFSI segment and technology occupiers are expected to be key drivers of office leasing demand in 2023. The flexible workspace segment is likely to sustain similar levels of leasing momentum in 2023. There may also be an increased momentum from the media and advertising segment that recorded 8x space take-up during 2022 as compared to 2021. 

Vacancy rates are projected to stay at a consistent level of around 19%-20% by December 2023. Significant new supply of 6.2 million sq. ft. is scheduled to be completed during 2023. This planned supply will likely be concentrated in these micro-markets - Central Mumbai (35%), Thane (32%) and Eastern Suburbs (27%).

Some of the key highlights of 2022 for Mumbai office market is Mumbai recorded Grade-A gross absorption of 6.7 million sq. ft. during 2022, registering a YOY increase of 46%. Owing to the advantage of sub-dollar rents, Navi Mumbai attracted a majority (22%) of the overall demand. This was followed by New CBD BKC (15%), Central Mumbai (14%) and Thane (13%). 

BFSI occupiers preferred large-sized deals; other leasing mainly driven by mid-sized deals: Mid-sized deals of up to 100,000 sq. ft. accounted for 52% of Grade-A gross absorption during 2022. Larger deals of over 100,000 sq. ft., accounting for about 22% share, were mainly signed by BFSI occupiers in the micro-markets of Thane and Navi Mumbai. 

BFSI segment continued to be the demand driver during 2022, garnering a 38% share in Grade-A gross absorption followed by technology occupiers garnering a 16% share. Consulting occupiers, engineering and manufacturing occupiers and flexible workspace operators accounted for a 7% share each in gross absorption. The city witnessed 5.4 million sq. ft. of Grade-A supply infusion during 2022, more than double of that witnessed during 2021.Amidst significant gross absorption and new supply infusion, overall vacancy levels in the city rose to 20.0% at the end of December 2022.

In the backdrop of robust leasing, citywide Grade-A quoted rental values strengthened by about 8% YOY. Rental values in the micro-markets of Central Mumbai, New CBD BKC and BKC Periphery contributed to this increase. 

In addition to new leases totaling 6.7 million sq. ft., the city saw renewals of 2.7 million sq. ft. throughout 2022. These renewals mainly occurred in Navi Mumbai, New CBD BKC, and Central Mumbai, indicating a continued level of confidence in the city, particularly among BFSI occupiers.

Tags : employees workplaces momentum International real estate advisory Savills India