Office gross absorption across the top seven cities touched 16.7 million sq feet, a drop of 36% YOY, led by COVID-19 induced economic slowdown and slow decision making by occupiers, said Colliers International in it's latest report. Majority of the deals expected to take place in Q2 2020 were pushed to subsequent quarters, or are being reconsidered, as occupiers focus on business continuity plans during the lockdown and workplace readiness, as they slowly look to reopen offices.
On the supply front, the first half of the year saw about 24.1 million sq feet of project completions, a 2% increase, led by project completions in Bengaluru, Delhi-NCR and Hyderabad, the report mentioned.
“Office market has been the flag bearer of consistent and highest returns amongst all real estate asset classes in India for quite some time; the market today, needs to read the Occupiers’ challenges and customise solutions for a win-win coexistence”, said Sangram Tanwar, Managing Director, Mid- India at Colliers International.
As per the report leasing in Bengaluru, during H1 2020 dropped about 33% YOY to 5.4 million sq feet, from corresponding period last year. The majority was due to the loss of activity in Q2 2020, led by the government-imposed lockdown that affected the city. While some deals in the pipeline have been postponed, the city continued to see some large deals, as planned. On the supply front, about 6.9 million sq feet became operational during H1 2020, a drop of 13% YOY.
“Market fundamentals in markets with low vacancy levels have not changed much in terms of rentals and it continues to be developer-centric. We do not foresee much change in the long run”, said Arpit Mehrotra, Managing Director, South India (Office Services) at Colliers International India.
Hyderabad and Chennai saw leasing fall by 62% and 32% YOY on account of slower uptake of office space. Delhi-NCR saw 27% YOY to 3.2 million sq feet. While Mumbai saw the steepest fall at 53%, the report mentioned.
“After a historical high in 2019, leasing is likely to see a dip this year, and we forecast about 38 million square feet of gross leasing for 2020, before rebounding next year, led by the technology sector. Post the initial unrest, we believe occupiers should return to their drawing boards to revisit their space requirements, keeping facets such as densification, health and wellness at the core of the decisions.”, says Megha Maan, Senior Associate Director, Research, Colliers International.
However, the market is seeing some positivity with large tech and e-commerce firms looking to lease large spaces across tech hubs of India.