APPD Market Report Article


May 26, 2024

Dr Samantak Das, Head of Research, India


INR 227


Net absorption up 70% y-o-y

  • The quarter started off well with an overall leasing activity of 2.1 million sq ft, higher than the average quarterly leasing witnessed in 2023. The leasing activity was dominated by the BFSI sector, with a significant share of 43.8%. The Western Suburbs submarket led the leasing activity with 29.0% followed by the Eastern Suburbs with 20.3%.
  • The quarter recorded a net absorption of 1.5 million sq ft, predominantly backed by strong leasing activity recorded in the Western Suburbs submarket. Some of the large deals in the Western and Eastern Suburbs submarkets from the BFSI category helped net absorption to reach this level.

Supply continues to be healthy during the quarter

  • A supply of 1.6 million sq ft came on stream in 1Q24, largely driven by a couple of large-sized projects in the Western Suburbs and Thane submarkets. The SBD BKC submarket also recorded a supply of 0.1 million sq ft. The Western Suburbs recorded the highest share at 68.7%, while Thane and SBD BKC recorded respective shares of 24.4% and 6.8%.
  • Oberoi Commerz III Phase 2 with 0.7 million sq ft and 63 GMA with 0.5 million sq ft, both in the Western Suburbs submarket, witnessed completions during 1Q24. Sunteck Icon in the SBD BKC submarket, with 0.1 million sq ft, also became operational in 1Q24.

Rents show slight increase q-o-q

  • In 1Q24, rents rose by 1.1% q-o-q, while on a yearly basis, rents were up by 3.1%. The increase was primarily on the back of quality project completions in the Western Suburbs submarket and one project completion in the SBD BKC submarket.
  • Capital values increased at a faster pace than rents, leading to a compression in yields. Investors remained bullish as they continued to scout for lucrative investment opportunities for quality assets and options to buy stressed assets with attractive pricing.

Outlook: Market momentum to reflect growth trend

  • The city is likely to drive office space demand, primarily backed by the BFSI sector and followed by the consulting and manufacturing sectors. With the upcoming quality supply, we foresee healthy space take-up in the medium-term, leading to vacancy rates remaining range-bound.
  • In 2024, we foresee Grade A supply of 8.4 million sq ft, with the expected net absorption in the range of 5.5–6.0 million sq ft. In the recent past, occupiers have been looking for opportunities for business expansion, keeping the capex under control. This trend is likely to continue in the medium term, with flex emerging as a strong option across the board for many firms.

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

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