scorecardMumbai’s office space absorption drops sharply in January-March
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Mumbai’s office space absorption drops sharply in January-March

Mumbai’s office space absorption drops sharply in January-March
Finance2 min read
  • Mumbai absorbed 1.2 million square feet during the quarter, which is 25% less than the last quarter.
  • Tenants’ approach to cutting costs reduced real estate activities across the micro markets of Mumbai, the report said.
  • Overall, in the top seven markets, office space absorptions grew by 2% on a QoQ basis, and dropped by 4% on a YoY basis.
India’s maximum city Mumbai saw a sharp quarter-on-quarter (QoQ) drop in office space absorption in the first quarter of 2023, says a report by Vestian, a workplace solutions company. The report says that the city absorbed 1.2 million square feet during the quarter, which is 25% less than what was seen in the December quarter.

“Tenants’ approach to cutting costs reduced real estate activities across the micro markets of Mumbai. The effect of demand slowdown was prominent as the city accounted for only 10% of the pan-India absorption. It declined from 14% a quarter earlier,” the report said.

In spite of the slowdown in demand, the city has limited availability of new Grade A office spaces, which helped rents go up by 1.7% during the quarter. “Surprisingly, the city did not witness any new supply during the current quarter. This could be attributed to the developers’ cautious approach during the demand slowdown. New completions are declining since the third quarter of 2022,” said Vestian.

While Mumbai saw the sharpest drop amongst the top seven cities, office space absorption also reduced in Kolkata and Bengaluru by 13% and 6%, respectively, on a QoQ basis. Hyderabad’s office space absorption went up the highest – at 36%, sequentially.



Top seven markets see 4% on-year drop in office space absorption

Overall, in the top seven markets, office space absorptions grew by a marginal 2% on a quarter-on-quarter basis. On a year-on-year basis, they went down by 4%. The report said that mass layoffs and the looming fear of recession in the US economy led to a slender slowdown in the demand for office spaces in India.

“Early signs of economic uncertainty across the globe are visible in the Indian office market as well. However, the cost advantage of shifting operations to India from developed countries may play a pivotal role in the growth of office markets in India. Overall, 2023 is likely to be a challenging year for the top office markets of India,” Vestian said.

Despite the overall slowdown, the IT-ITeS sector continued to lead office space absorption, accounting for a 23% share during Q1 2023. However, this figure represents a decrease from the previous quarter's 31% share.

In spite of a reduction, office space absorption surpassed new completions during Q1 2023, leading to a correction in overall vacancy at 16.1% during the quarter. New completions in the top seven cities of India amounted to 8.6 million square feet during the first quarter of 2023, marking a decline for two consecutive quarters.

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