Mumbai figures in top three cities globally that will add the maximum supply of Grade-A office space through 2017, according to a recent finding by JLL. Shanghai tops the list among major global markets and is followed by Mexico City, Mumbai, Beijing, Singapore, Sao Paulo, Tokyo, Moscow, San Francisco and London in the top 10, as of 1H2016, according to Ashutosh Limaye, National Director – Research, JLL India.
The current office stock of the city stands at 106 million square feet and it will add 8 per cent of this stock through 2016 or almost 8.5 mn sq ft. From 3Q 2016 through 4Q 2017, the financial capital of India will expand its Grade-A office footprint by around 15 per cent or almost 16 mn sq ft.
These figures do not factor in construction delays. However, given the track record of developers as far as sticking to construction deadlines is concerned, the supply could be around 13 million sq ft, which is significant nonetheless.
In the survey that covers all office sub-markets in each city, it’s the markets from emerging economies that dominate the top-10 list. Shanghai comes on top with 42 per cent of its current stock to be added in the next 18 months, followed by Mexico City (at 22.5 per cent).
Beijing (at 14 per cent), Sao Paulo (10 per cent) and Moscow (at 7 per cent) are the three other cities from emerging economies among the top-10. Among the mature economies, Singapore City will add 11 per cent, Tokyo will add 9 per cent, San Francisco will add 6 per cent and London will add 5 per cent of their current office stock.
What needs to be noted here is that much of this projected office supply consists of buildings launched many years ago and Mumbai has seen only a few launches in the last few years. While the peripheral areas will see an oversupply, the supply at right locations will be very less.
The Grade-A supply to come up in 2018-19 in the city’s de-facto central business district (CBD) of core Bandra-Kurla Complex (BKC) and SBD Central will be just 1.6 million sq ft in an ideal scenario, i.e., when delays do not occur in construction work, out of a total expected supply of 11 mn sq ft.
Most of the rest will come up in the peripheral areas. This will have implications after 2019, with supply drying up in the right locations. Also, rentals in the central locations will go up even as rentals in peripheral areas will remain stagnant. Developers can, therefore, consider constructing new buildings to meet the future demand in the good locations.