Mumbai office supply hits highest quarterly level in almost three years

There was a total of 2.64m sq ft of new supply added in Q2 2024.

The second quarter of 2024 witnessed office project completions in Mumbai of close to 2.64 msf, the highest quarterly supply seen in the last eleven quarters, according to Cushman and Wakefield. 

This brings the H1-24 total to 3.99 msf, higher than the annual supply witnessed in the last two years. Given the steady supply witnessed this quarter, the city level vacancy witnessed an uptick of 41 bps taking it to 17.64%. 

Here’s more from Cushman and Wakefield:

The supply pipeline continues to remain healthy with close to 23.53 msf cumulative supply expected between Q3- 2024 to 2026. Despite substantial supply forecasted in suburban submarkets in 2024, the overall city vacancy is expected to remain range bound given the steady growth in fresh demand. 

Continued strong momentum in city leasing driven by fresh leasing

The second quarter of 2024 showcased a steady gross leasing volume (GLV) of 4.78 msf, maintaining the momentum from the previous quarter and marking a 75% increase compared to the same period last year. 

Fresh leases were the primary driver of this activity, constituting 59% of the GLV, with the remaining share accounted for by term renewals. Notably, there were no new pre-commitments recorded this quarter. 

In terms of sectoral distribution, Professional Services led the way with a 21% share of the quarterly GLV, followed by Engineering & Manufacturing at 16%, GCC at 15%, and BFSI at 13%.Key submarkets exhibited significant leasing activity, with Thane Belapur Road capturing 23% of the quarterly GLV, Central Suburbs at 15%, and Malad Goregaon at 14%. These areas experienced robust fresh space uptake, contributing to the overall growth. 

For the first half of the year, the city recorded a total of 9.56 msf of GLV activity, reflecting a 70% increase compared to the first half of 2023. This growth is largely attributed to a 100% rise in fresh leasing activity at the city level during the period, with notable contributions from active submarkets such as Thane Belapur Road, Malad Goregaon, and Central Suburbs. 

In terms of net absorption, Q2-24 recorded 1.72 msf, a 30% dip from a strong previous quarter but a 2.3x increase from the same period last year. This was largely driven by robust fresh space take-up in the aforementioned submarkets. Notably, the H1-24 net absorption numbers stand at 4.18 msf, close to the annual absorption numbers witnessed in the last two years.

City wide rental continues to rise; Suburban market rentals set to improve 

City-wide market rentals have seen a marginal uptick of 0.23% on q-o-q and 7% on y-o-y basis. Submarkets such as Worli, Malad Goregaon and Powai witnessed a strong annual growth of 10-15% given the steady leasing activity in superior-grade assets. With a healthy demand outlook and a drop in vacancy, the city rentals may improve across some key sub-markets. 

The commercial corridors in submarkets like Andheri Kurla, BKC and Western Suburbs are likely to witness rent uptick, receiving a boost from the soon-to-be-operational Metro Line 3 (Phase I) and its integration with current operational Metro Lines of 1 and 7.