APPD Market Report Article


September 4, 2023

Dr Samantak Das, Head of Research, India


INR 222


Net absorption up 11.0% q-o-q

  • Indian occupiers drove the leasing activity in 2Q23 with maximum traction from the BFSI and Consultancy Business segments. Flex space operators continued to gain momentum amid an increased preference from occupiers to keep capex under control. Major pre-commitments remained intact as well.
  • SBD North accounted for the highest leasing activity, followed by the West Suburbs and SBD Central. Net absorption was up 11% q-o-q, but a lack of sizeable, quality completions in 1H23 saw net absorption record a 33% decline compared to the same period the previous year.

Limited supply addition of 0.14 million sq ft

  • Construction activity continued to gain momentum, though a few project completions were deferred to the next quarter due to a delay in obtaining occupation certificates. Only one project, Supreme Headquarters (0.14 million sq ft) in the SBD BKC, was completed during the quarter.
  • With quarterly net absorption higher than the net increase in stock, the vacancy rate dropped by 40 bps q-o-q to 12.9%.

Overall rents witness a marginal rise q-o-q

  • Rents in the city rose marginally in 2Q23, largely driven by rent growth in the SBD BKC. A noticeable rise in capital values was seen in the BKC and East Suburbs, where vacancy remained low amid limited availability of space.
  • With key submarkets and quality buildings witnessing rents holding up and on an upward trajectory, occupiers continued to look for ways to rationalise occupancy costs by either renegotiating leases, reducing their footprint, relocating to more affordable corridors or moving to a flex office. Landlords have been holding rents steady; however, they are willing to offer extended rent-free periods.

Outlook: Steady demand outlook for the year

  • About 5.7 million sq ft of office space is scheduled to complete in the second half of 2023 at an optimal pace. Demand for flex space and managed workspaces is likely to be high as occupiers look to lower costs amid global headwinds.
  • Demand is expected to be driven by medical technology, health analytics, online education, data centres, gaming, pharma and FMCG sectors. Towards end-2023, supply is expected to outpace demand, leading to a slight increase in vacancy. Capital values are expected to rise faster than rents due to rising investor interest, which will lead to a compression of yields in key submarkets.

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

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