Mumbai office space to hit 100 mn sq ft next year

At 100 million square feet mark, vacancy rate going to hover at 22.2%

Though rentals in the commercial real estate (CRE) space in the city especially in the elite south Mumbai locality have nose dived, there is no stopping developers from adding more office space.

As per a report prepared by Jones Lang Lasalle India, a real estate services firm, has estimated that about 13 million square feet of commercial real estate stock would be to the city by the fourth quarter of 2014 taking the tally up to 100 million square feet.

However, not all of it would be absorbed. At 100 million square feet mark, the vacancy rate is going to hover at 22.2%, further stated the report. Mumbai, however, remains the largest commercial real estate market (in terms of space availability) in the country.

Ramesh Nair, Managing Director - West, Jones Lang LaSalle India, said, "When the city's supply of CRE reaches this milestone, the three largest micro-markets will be SBD North with 22 million square feet, Thane and Navi Mumbai with 21 million square feet and the Western Suburbs with 16 million square feet. At that point, the two other heavyweight CRE markets - Bangalore and Delhi NCR - will have 86 million and 89 million square feet respectively".

Rents in most of Mumbai’s micro-markets have stabilised, and most of them are now showing convincing indications of having bottomed out. Given the basic scarcity of available right-sized Grade A office stock in Mumbai's prime locations, rentals are expected to go up by around 6% in 2013.

As per an analyst, In 2012 there was a dip of 35% in the Mumbai office market absorption in comparison with 2011, when the total absorption for the year was at the historical high level of 9.6 million sq ft.