Mumbai witnesses 23 per cent decrease in new office space supply in 2023

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Mumbai witnessed a notable 23 percent decline in new supply of office space last year, totalling 2.7 million square feet, primarily attributed to developers' reduced focus on this sector in anticipation of declining demand amid the Covid-19 pandemic, according to Vestian, a real estate consultancy.

Vestian highlighted that a surge in housing demand in recent years also contributed to the decreased supply of office spaces. Data revealed that fresh office space supply amounted to 3.5 million square feet in the 2022 calendar year. The figures stood at 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.

Vestian CEO Srinivas Rao, however, expects new supply to bounce back this year as demand will rise with gradual return of employees back to the office, newswire PTI reported.

Fall in new supply of office spaces and rise in the demand for workspaces led to a modest rise of 3.8% in rentals during the last year, the consultant pointed out.

"Strong fundamentals, emergence of other asset classes, and rapid infrastructure development is likely to keep the Mumbai real estate market buoyant. While the supply of office assets has slowed down in the past 3-4 years, it may pick up pace on the back of robust demand amid growing prominence of work-from-office mandates," Rao said.

Mumbai, one of the most active real estate markets in India, accounted for only 6 per cent of total supply of 48 million square feet across seven major cities last year.

The supply has been on a downward trend since 2018, further decelerating due to Covid-19 in 2020. However, it increased momentarily in 2021 to 6.5 million sq ft, but again continued its fall.

"During this uncertainty in the city's office market, developers re-strategised their portfolios. Other asset classes such as warehousing, date centre, and residential picked up pace on the back of robust demand post-pandemic. This significantly reduced the attractiveness of office assets in the city, leading to a gradual slowdown in supply," Vestian said.

The rise of other metro cities as an affordable option to Mumbai has also played a pivotal role in putting a dent in the confidence of developers in the past 4-5 years, it added. (With inputs from PTI)