Mumbai office leasing activity down 10.8% to 1.5m sq ft in Q3

Navi Mumbai accounted for almost a quarter of the leasing volume.

Mumbai witnessed office leasing activity of 1.5 million sq ft, down 10.8% q-o-q and 16.6% y-o-y. JLL said this was mainly due to the cautious approach taken by occupiers while expanding their office portfolio. 

Navi Mumbai recorded the most share with 23.8%, followed by SBD BKC with a share of 18.9%. Indian occupiers continued to hold their ground strongly during the quarter.

Here’s more from JLL:

Net absorption of 1.53 million sq ft was recorded in 3Q23, a notable rise of 56.2% q-o-q. SBD Central recorded the highest net absorption of 0.5 million sq ft, followed by SBD BKC with 0.3 million sq ft, primarily due to the healthy pre-commitments.

New supply on the rise over the past three quarters

Building completions witnessed strong momentum in the quarter on account of obtaining partial occupation certificates. Few completions, such as KRC Altimus (GIC Siemens) Phase 1 in SBD Central and BKC51 in the SBD BKC, were entirely pre-committed.

Since net absorption was higher than the new supply during the quarter, the vacancy rate dropped by 20 bps q-o-q to 12.7%.

Rents up marginally q-o-q

Overall rents witnessed a slight uptick in 3Q23, primarily on the back of rent growth in SBD Central submarket. Capital values also recorded almost similar growth rates across most submarkets.

With select quality completions in 3Q23, rents moved up slightly in the quarter. Occupiers continued to look for ways to cut their operating costs by either renegotiating leases with the landlords or by moving their operations to newer locations through relocation and consolidation.

Outlook: Demand likely to be stable

A supply addition of around 3.0 million sq ft is expected to hit the market in 4Q23. The trend of consolidation and relocation is here to stay, along with occupiers that are also considering the option of moving to managed workspaces to control costs and achieve greater portfolio flexibility.

The BFSI, Manufacturing and Consultancy sectors are likely to drive demand. By end-2023, the demand is expected to outpace supply, leading to a slight fall 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.