Vestian: New office space supply in Mumbai fell by 23% last year and may rise this year

Vestian said new supply of office space in Mumbai fell 23% last year to 2.7 million sq ft, mainly as developers reduced their focus on the asset class over the past few years in anticipation of lower demand due to the coronavirus pandemic.

Real estate consultant Vestian noted that a surge in housing demand over the past few years has also led to a reduction in new supply of office space.

New office space supply in 2022 will be 3.5 million square feet. Data show that new supply of office space was 7.5 million square feet in 2018, 5.3 million square feet in 2019, 4.1 million square feet in 2020, and 6.5 million square feet in 2021.

However, Vestian CEO Srinivas Rao expects new supply to rebound this year as demand rises as workers gradually return to the office.

The consultant noted that a decline in new supply of office space and increased demand for workspace last year led to a slight increase in rents of 3.8%.

“Strong fundamentals, emergence of other asset classes and rapid infrastructure development are likely to keep the Mumbai real estate market active. Although the supply of office assets has slowed down in the past 3-4 years, due to the increasing prominence of office work requirements, Demand is strong and supply is likely to accelerate,” Rao said.

Mumbai is one of India’s most active real estate markets, accounting for just 6% of the total supply of 48 million square feet across the seven major cities last year.

Supply has been trending downward since 2018, with further declines in 2020 due to the impact of COVID-19. However, supply briefly increased to 6.5 million square feet in 2021, but continued to decline again.

“Amid uncertainty in the urban office market, developers have reworked their portfolio strategies. Other asset classes such as warehousing, data centers and residential have picked up pace on the back of strong post-pandemic demand. This has significantly reduced the The attractiveness of city office assets has led to a gradual slowdown in supply,” Vestian said.

The rise of other metros as an affordable option to Mumbai has also played a key role in eroding developer confidence over the past four to five years, it added.

(This story has not been edited by News18 staff and is published from associated news agency – PTI)