India’s financial capital Mumbai will witness around 7 million square foot (msf) of Grade-A gross absorption in 2023, says a report released by real estate advisory firm Savills India. According to the report released on February 6, 2023, grown momentum for the sector in the Tinsel Town will continue in the ongoing year, similar to the level seen in 2022.
In 2022, the city recorded Grade-A gross absorption of 6.7 msf, marking 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 while other leasing was mainly driven by mid-sized deals. Mid-sized deals of up to 100,000 sqft accounted for 52% of Grade-A gross absorption during 2022. Larger deals of over 100,000 sqft, accounting for about 22% share, were mainly signed by BFSI occupiers in the micro-markets of Thane and Navi Mumbai. The 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 & manufacturing occupiers and flexible workspace operators accounted for a 7% share each in gross absorption. The BFSI segment and technology occupiers are expected to continue to be key drivers of office leasing demand in 2023.
The city witnessed 5.4 msf of Grade-A supply infusion during 2022, more than double of that witnessed during 2021. Significant new supply of 6.2 msf 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%).
Amid significant gross absorption and new supply infusion, overall vacancy levels in the city rose to 20% at the end of December 2022. Vacancy rates are projected to stay at a consistent level of around 19%-20% by December 2023.
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 msf, the city saw renewals of 2.7 msf throughout 2022. These renewals mainly occurred in Navi Mumbai, New CBD BKC, and Central Mumbai. 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.
Kaustuv Roy, MD, business solutions, Savills India, said, “The office leasing market in Mumbai has been showing signs of stability and growth, with steady returns of employees to workplaces and an increase in occupier confidence. Mumbai is a major financial hub, and the BFSI segment and technology occupiers are anticipated to be the key drivers of demand for office space in the coming year. The high number of lease renewals recorded in the city in 2022 is also a positive sign for the market.”
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