Mumbai's office market recovering from slowdown: Study

MUMBAI: The Mumbai commercial office space market has been steadily recovering from the worst of the economic slowdown even though demand stayed resilient. Corporate activity is still a reliable indicator of the underlying strength of the Mumbai office market though it is a far cry from its heydays in 2006, according to a research report by real estate firm Knight Frank.

The growing absorption numbers are yet to overtake the existing supply overhang, which has caused the demand-supply gap to widen over the past year. This has led to severe pressure on rent and vacancy levels in the real estate market.

The research report showed that transaction activity was characteristically subdued in the final quarter of the financial year as office expansion activity was more concentrated in the first half of the fourth quarter, FY11.

Hence, absorption numbers showed a 27% fall in Q4 FY12 from the preceding quarter. However, absorption grew over 23% over the fourth quarter last year, proving that the market was gaining momentum.

According to Knight Frank Research, about 1.1 mn.sq.ft. of area was transacted in Q4 FY12. Investment activity in terms of outright sales nearly doubled over the previous year. Although transacted rentals and capital values have seemingly fallen since Q4 FY 11, the fall is exacerbated due to bulk of the transactions taking place in lower priced submarkets.