1.robust rental in Q4 fueled by increased demand in suburban areas
Gross leasing volume (GLV) for Q4 of 2023 was around 5.2 msf, which was approximately 16% higher than the same period in the previous year and 54% higher than the preceding quarter. In recent years, this is the biggest quarterly leasing recorded. With a 60% share, new lease activity drove quarterly GLV, especially in submarkets like Central Suburbs and Lower Parel. Submarkets with the highest lease volume in Q4 were Malad Goregaon (19.5%), Central Suburbs (17.1%), and Andheri Kurla (11.8%). In terms of sector-wise share, BFSI (25%) and Professional Services (21%) continue to be significant contributors to the quarterly GLV. The quarterly net absorption was 2.3 msf, a 1.2x gain on a week-over-week basis and a 9% decrease from Q4-22’s strong activity.
Nearly 14.2 million square feet of GLV were reported for the entire year 2023, a tiny 6% decrease from the robust yearly numbers of the year before. With a 51% share of the yearly leasing volume, Fresh Lease remained dominant, helped in great part by submarkets like Lower Parel and Central Suburbs, which had 14% and 13.5% shares, respectively. The 4.5 msf annual net absorption figure is roughly comparable to the 4.7 msf recorded in 2022. This is ascribed to the robust increase in new lease activity that was primarily observed in 2023’s second half.
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2.Supply constraints in the city results in vacancy dropping sharply
With project completions of roughly 1.03 million square feet this quarter, the 2023 annual supply is estimated to be 2.04 million square feet. This represents a 44% decline from the record low supply observed in the previous year, suggesting that the supply-starved city office market of 2023 will persist. With a robust supply pipeline for 2024 and 2025, which is mostly focused in submarkets like Andheri Kurla, Central Suburbs, and Navi Mumbai submarkets, the current supply slowdown will be partially alleviated. The vacancy rate has decreased by 195 basis points to 18.45% during the last four quarters due to a lack of supply entering the market in spite of high demand.
3.City rentals rise in prominent submarkets
The rental market as a whole has somewhat increased, 1.3% year over year and 3.5% year over year. Submarkets with superior-grade asset leasing activity, like Worli, Lower Parel, and Malad Goregaon, have grown relatively more than the previous year. Given the positive demand outlook and declining vacancy rates, city rentals in important submarkets should get even better.
MARKET STATISTICS
KEY LEASE TRANSACTIONS Q4 2023
Presented by Rudra Realty
