Looking back on 2013, the prevailing attitude among businesses toward the economy was “wait and see. The decision to take up more real estate office space was mostly put on hold; or companies aggressively looked to bring down their costs. Corporates put their investment decisions on hold, waiting to see how the economic scenario unfolds especially in light of the forth-coming national elections.
With this backdrop of uncertainty, commercial real estate in Mumbai produced mixed results. Office take-up in Mumbai in 2013 was recorded at 4.76 million sq. ft., which was 21 per cent lower as compared to the previous year. The first half of 2013 was notably stronger than the second half, but the whole year was marked by a lack of large leasing transactions.
The banking and financial services and IT/ITeS sectors was the prime driver of the office space market. Most occupiers that leased space in 2013 had done so either because the current lease agreement expired or to tap the opportunity to relocate and consolidate at lower rents in superior office space. Major micro-markets like Central Mumbai, Navi Mumbai, Andheri East & Western Suburbs together constitute approximately 70 per cent of the total absorption.
As a result of dampened office demand, developers refrained from building new office space and speculative development remains limited and restricted to small dimensions. This is reflected in the reduction of new office supply which is reduced by 30 per cent as compared to last year. Approximately 3.5 million sq ft of Grade A Office building was delivered in 2013. This reduction in supply was due to delay in project completion. From the total delivered office space approximately 70% of the supply was concentrated in Andheri – Kurla and Malad — Goregaon stretch.
Due to limited addition of supply, the vacancy has decreased marginally. Overall Grade A stock available for fit out is currently stood at 7.8 million sq. ft., which is about 16 per cent lower as compared to last year figures of around 9.3 million sq. ft. This positive move further led to decline in average annual vacancy levels from 17 per cent in 2012 to 14 per cent in 2012 to 2013 respectively.
Rentals remain stable in most of the market in Mumbai except marginal alterations in few of the micro markets such as CBD and Lower Parel registered an 3 per cent drop year-on-year, similar drop of around