Non-IT space slated to dominate Mumbai’s new office stock

This blog addresses the future office supply in Mumbai, highlighting past demand trends, expected demand trends and future supply by submarkets.

September 16, 2022

Mumbai’s current office stock is 145.2 million sq ft which is second in size only to Bengaluru with 185.4 million sq ft. It is ~20% of the total operational stock among the top seven cities in the country.

It is one of the most expensive commercial real estate markets in India, with the country’s highest office rents and capital values. The city’s average rent of INR 130 per sq ft/month is higher than premium office rents of some other global top-tier cities. Moreover, Bandra Kurla Complex (BKC), the city’s most upmarket business district, has buildings commanding some of the highest rent in the country, ranging from INR 350-450 per sq ft/month. Mumbai has been ranked among the top 20 cities globally in JLL’s City Momentum Index since 2018 for its strong real estate demand dynamics.

Mumbai office demand dynamics

Historically, Mumbai being the financial capital of India, banking and financial services (BFSI) occupiers account for the lion’s share of the city’s office stock. However, in the last 10 years, IT occupiers have forayed into the city primarily in the peripheral business districts due to their preference for larger floor plates and comparatively lower rents.

Figure 1: Occupier Share

Source: JLL Research, 2Q22

This increase in demand from the IT industry led to an increase in the IT stock, with its share rising to be almost at par with the non-IT segment. However, unlike the southern Indian cities, where the IT sector dominates demand and supply, Mumbai has a diversified economic base with sectors such as BFSI, consulting, pharmaceutical, IT and manufacturing occupying a significant portion of the city’s office space.

Mumbai office stock classification

As of June 2022, Mumbai’s Grade A office stock was 145.2 million sq ft, of which 46.5% is non-IT, and 53.5% is IT and IT SEZ.

Figure 2: Grade A office stock

Source: JLL Research, 2Q22

Recently, an uptick in demand has been recorded from the non-IT occupiers like BFSI, manufacturing/industrial and consultancy businesses, particularly in secondary business districts (SBDs) and the suburbs. Out of 40 million sq ft of grade A office supply scheduled to come online the next five years (2022-2026), we expect about 72%, i.e., 29 million sq ft, to be commercial/non-IT space.

Figure 3: Future Supply

Source: JLL Research, 2Q22

Future supply by sub-market

Over 50% of the future non-IT supply in Mumbai is expected to come from the SBD Central, SBD BKC and SBD North (SBDs) and around 30% is expected to come from West and East suburbs (Suburbs). Even the IT-dominated submarkets like Thane and Navi Mumbai have about 20% non-IT share in the future supply.

Figure 4: Future Supply by submarket

Source: JLL Research, 2Q22

The non-IT occupiers usually look for space for setting up their front offices. They prefer small to medium-sized floor plates, top-notch construction quality, the latest amenities and premium address. These are the characteristic features of the office stock in SBDs and, to an extent, of the suburbs. Hence, most of the future non-IT supply is concentrated in the SBDs and the suburbs. The development of non-IT projects would benefit landlords/developers as these projects offer a larger market spectrum catering to all sectors except IT.