Mumbai gross office leasing volume sees robust 25.3% growth in 2021 

Leasing volume hit 10.42msf, nearly half of which are fresh leases.

Gross office leasing volumes in Mumbai slipped 9.3% q-o-q to 2.86 msf in Q4 2021. But compared to Q4 2020, gross leasing actually increased 29.7%. According to Cushman & Wakefield, the overall gross leasing activity was driven by 1.54 msf of fresh leasing and 1.32 msf of term renewals during the quarter. 

On an annual basis, analysts at Cushman & Wakefield reveals that gross leasing volume in 2021 stood at 10.42 msf, which is higher by 25.3% compared to 2020, with fresh leasing and term renewals at 4.62 msf and 5.64 msf, respectively in the current year. Within Greater Mumbai, Central Suburbs, Andheri-Kurla and BKC markets saw maximum leasing in Q4 with shares of 16%, 15.8% and 13.8%, respectively, of the total MMR leasing. 

Here’s more from Cushman & Wakefield:

However, overall leasing quantum was highest in Thane-Belapur submarket with a 16.3% share in Q3, thereby making it the largest submarket by quantum even for the full year. In Q4, the BFSI and IT-BPM sectors accounted for 22% and 18% share of market activity, respectively, while Engineering & Manufacturing and Professional Services contributed 16% and 8%, respectively. 

Vacancy has risen marginally by 30 bps to 23.1% in Q4 owing to a couple of reasons. Firstly, select large occupiers churned their existing space in favour of built-to-suit spaces, or in few cases, surrendered their existing space without expressing plans to immediately lease at an alternate location. Besides, new supply that came in also contributed to this rise in vacancy. Having said that, net absorption has more than doubled to 0.53 msf in Q4. 

For the full year, net absorption stood at 1.95 msf, a fall of ~23% on a y-o-y basis. Going forward, leasing activity is expected to remain strong during 2022. Based on market knowledge, occupiers from IT-BPM, BFSI, engineering & manufacturing, professional services, along with GCCs of BFSI are expected to drive office space demand in the coming quarters. 

Peripheral and suburban sub-markets to witness maximum upcoming supply 

A total of 1.22 msf of new supply came up during Q4 with Lower Parel accounting for the bulk (1.0 msf) of it. The remaining completion in Q4 was recorded in the BKC submarket. For full year 2021, a total of 5.53 msf of new supply was added in the city with Lower Parel, Malad-Goregaon and Thane-Belapur Road witnessing maximum completions. 

Going forward, we expect an additional 16.6 msf of supply over next three years with Thane-Belapur Road (Navi Mumbai), Andheri-Kurla, Thane and Lower Parel-Worli submarkets seen contributing the most. Many occupiers have shown preference for submarkets of Thane-Belapur Road, MaladGoregaon, Central Suburbs and BKC for their future demand. 

Rental values across sub-markets remained stable during the quarter

The quoted rental values across all major submarkets remained unchanged as of Q4. However, on an annual basis select sub-markets witnessed 1-5% drop in rental values during 2021. 

The trend of some landlords offering rental discounts of 5-10% along with an increased rent-free period to potential occupiers did continue during the quarter, although capital values across all sub-markets remained stable. Foreseeable improvement in leasing activity, particularly in the 2H-2022, is expected to have a benign effect on rents.