Take-up of office space in first quarter of 2014 declined by four per cent to one million square feet compared to 1.05 million square feet in the fourth quarter of 2013, according to the DTZ Property Times Mumbai Office and Retail Q1 2014 report.

This was owing to occupiers in Mumbai remaining cautious due to “uncertain conditions arising from the upcoming general elections,” said the report.

The report further highlighted that the pharmaceutical sector emerged as the largest contributor (30 per cent) to take-up in Q1 as against the predominant BFSI and IT sectors in the previous quarter. 

About 1.87 million square feet of new supply of office space was added to existing stock in Q1. However, due to lower pre-commitments in new supply, the vacancy level in office space increased marginally from 20.4 per cent in Q4 2013 to 21.1 per cent in Q1 of 2014, said the report.

With low demand for the Central Business Districts (CBD), average rents declined to under Rs 250 per square feet and new CBD also witnessed a decline of eight per cent in average rental values. According to the report, the decline in rents can largely be attributed to low demand from the BFSI and IT sectors in Mumbai.

“Rents are likely to remain stable throughout 2014 due to high vacancy levels in existing stock and high upcoming supply,” the report added.

The retail segment also witnessed lacklustre market activity in Q1 as most retailers deferred their expansion plans to the latter half of the year and resultantly the vacancy level in malls increased from 14.3 per cent in Q4 to 16.5 per cent in Q1, according to the report.

 “This rise in vacancy is largely due to tenants exiting underperforming malls located in the east and peripheral locations. Notwithstanding this, the low vacancy levels in grade A malls coupled with consistent demand for these malls resulted in average rents increasing by approximately four per cent during the quarter,” the report added. 

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