Mumbai to witness 4.5 million sq ft office leasing in 2022, report

Mumbai, the country’s commercial capital, is likely to clock in gross absorption of around 4.5 million sq ft Grade A office spaces in 2022 as the strong vaccination drive is expected to continue to build occupier confidence, leading to gradual return to office for employees, according to international real estate advisory firm Savills India. The city recorded gross absorption of 4.6 million sq ft Grade A office spaces in 2021, registering a year-on-year increase of 59%. The gross absorption was split as 30:70 between the first and the second half of 2021. In addition to fresh leases of 4.6 million sq ft, the city witnessed renewals amounting to 4.7 million sq ft in 2021. The renewals were noticed majorly in the micro-markets of Navi Mumbai and eastern suburbs. “The vaccine administration programme is gradually seeing the return of employees to office. With the precaution (booster) dose now being eligible for many and with Omicron cases reducing, we anticipate the return to office to gain momentum in the rest of 2022. While we cannot rule out more variants of the virus including some more waves, our prognosis is that office leasing volumes will be stable in 2022,” said Bhavin Thakker, MD, Mumbai & Head – Cross Border Tenant Advisory, Savills India. The banking, financial services and insurance (BFSI) segment along with technology occupiers is likely to lead the office leasing demand during the year. Increased demand from data center operators, especially in the micromarket of Navi Mumbai is expected to emerge. The vacancy rate may increase marginally to 21% by December 2022 and the overall Grade-A rental values are expected to remain stable. The city is likely to witness a new supply of 6.9 million sq ft based on the scheduled completions during 2022. This planned supply constitutes IT and non-IT developments concentrated in the micro-markets of Central Mumbai and Navi Mumbai. In 2021, the BFSI segment continued to be the demand driver, garnering a 52% share in Grade-A gross absorption, followed by technology occupiers accounting for 12% share and engineering and manufacturing occupiers accounting for 5% share, Savills India said. The city witnessed 2.5 million sq ft of Grade-A supply infusion, registering an increase of 62% over 2020. Majority of the new supply was in the form of IT developments in the micro- markets of Navi Mumbai and Western Suburbs II. Vacancy levels in the city rose to 19.1% at the end of December 2021 pushing the rental values southwards by 4% in 2021 compared to those in 2020. Source: The Economic Times