APPD Market Report Article


February 22, 2024

Dr Samantak Das, Head of Research, India


INR 225


Net absorption in 4Q the highest in 12 years

  • Overall leasing activity showed marked improvement in 4Q, rising by 83% q-o-q, driven by significant activity by the BFSI and Manufacturing sectors. On a y-o-y basis, leasing was still lower by 24.6%. In 2023, leasing activity was dominated by BFSI with a 27.7% share, followed by consultancy business and the Manufacturing sector with respective shares of 17.1% and 15.7%.
  • In 4Q23, net absorption rose to its highest quarterly figure for the past 12 years, backed by strong pre-commitments in projects that became operational during the quarter. For the full year, net absorption rose to a six-year high, with Western Suburbs accounting for the highest share of 29%, followed by SBD Central and Navi Mumbai.

Strong supply additions in the year

  • A supply of 5.1 million sq ft was added in 2023, predominantly on account of a few large-sized projects receiving occupation certifications, and these projects were also backed by good pre-commitments. The Western Suburbs submarket recorded the highest share of 34%, followed by SBD Central and SBD North submarkets.
  • KRC Altimus in SBD Central and Oberoi Commerz III Phase 1 in Western Suburbs were the two large completions recorded in 2023, with gross leasable areas of around 1.2 million sq ft and 1.7 million sq ft, respectively.

Rents up marginally q-o-q

  • In 2023, rents rose by 3.1% y-o-y, 90 bps higher than the growth seen in the previous year. The increase was mainly due to the large project completions in SBD Central and Western Suburbs submarkets, which came on-stream with significant rent premiums.
  • Capital values also rose, while yields compressed further, with capital value growth outstripping the rise in rents. Investor sentiment remained strong as institutional investors continued to look for opportunities for either quality assets with higher rent yields or stressed assets with lower valuations.

Outlook: Demand likely to trend upwards

  • The BFSI, Manufacturing and Consulting sectors are likely to be the main demand drivers in 2024, as they were in 2023. A robust space take-up is likely to support keeping vacancy levels within range. Tight vacancies are likely to prevail in core office markets, with Prime assets now at high occupancies and supply being limited in the short term.
  • We expect a Grade A supply of 6.1 million sq ft in 2024. Occupiers are likely to remain oriented towards footprint growth, accompanied by relocation/consolidation strategies for cost and portfolio optimisation. Flex options are expected to remain a key component of occupier space planning as well, supporting the growth of this segment.

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

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