In 2023, Mumbai, India’s financial hub, witnessed a significant 23 per cent year-on-year decline in the supply of new office spaces, reaching a historic low of 2.7 million square feet, according to Vestian, an occupier-focused workplace solutions firm. 

This downturn is attributed to real estate developers’ cautious approach in constructing office complexes over the past few years, anticipating reduced demand due to the ongoing Covid-19 pandemic. In 2022, the fresh supply of office spaces was at 3.5 million square feet.

Vestian’s CEO, Srinivas Rao, anticipates a rebound in new supply as employee return-to-office trends gradually gain momentum. Besides pandemic-related disruptions, Vestian identifies a surge in housing demand as a contributing factor to the decreased supply of office spaces.

Real estate firms in Mumbai have diversified their portfolios, venturing into data centres and warehousing projects to meet the growing demand for such assets alongside residential and commercial developments. Despite the decline in the supply of new office space, there was a modest 3.8 percent rise in rentals over the past year, driven by increased demand for workspaces.

Rao remains optimistic about Mumbai’s real estate market, citing strong fundamentals, the emergence of diverse asset classes, and rapid infrastructure development. While the supply of office assets has slowed in recent years, he expects an uptick fuelled by robust demand, especially as work-from-office mandates regain prominence.

The Vestian report highlights Mumbai’s decline in supply since 2018, exacerbated by the uncertainties of the pandemic, prompting developers to reevaluate strategies and focus on alternative asset classes. The city’s office market has faced challenges with the rise of other metro cities offering more affordable options, impacting developers’ confidence in the past 4-5 years.