Gurgaon, NFAPost: 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.
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.
Comment on the development, India at Colliers International Managing Director Sangram Tanwar said 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 Colliers International South India Managing Director Sangram Tanwar.
Bengaluru’s Gross Absirotuib Drops 33%
Leasing during H1 2020 dropped about 33% YOY to 5.4 million sq feet, from corresponding period last year. 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.
Colliers International South India (Office Service) Managing Director said market fundamentals in markets with low vacancy levels have not changed much in terms of rentals and it continues to be developer centric, however, companies have started witnessing some flexibility from developers.
“In the short run, delayed decision making, contract re-negotiations, measurement and effectiveness of work from home seems to be the underlying trends. Market fundamentals look positive and we do not foresee much change in the long run”, Colliers International South India Managing Director Sangram Tanwar..
HYDERABAD: LEASING FELL 62% YOY DURING H1 2020; HIGH PRECOMMITTMENTS RECORDED
During H1 2020, gross absorption in Hyderabad fell 62% YOY to 1.7 million sq feet, on account of slower uptake of office space. However, the prospects of the city remain strong, especially since 3.9 million sq feet of pre-commitments have been recorded in H1 2020. Supply during H1 2020 was about 4 million sq feet, a drop of about 50% YOY
DELHI-NCR: GROSS LEASING DOWN 27% YOY TO 3.2 MSF
During H1 2020, gross absorption fell 27% YOY to 3.2 million sq feet. Majority of the leasing activity was led by NOIDA that accounted for 56% of the total leasing in the region. While leasing during 2020 is likely to be affected by a wait-and watch approach by occupiers, NCR will likely overtake Hyderabad to come to the second position by end of 2020.
“We foresee the current slowdown in the office market as a temporary setback due to the pandemic. We foresee the markets to pick up in H2, 2020 as most transactions for Q2 have been pushed to the second half and majority of occupiers have now started taking decisions about their real estate portfolios”, said Sanjay Chatrath, Managing Director, North India at Colliers International.
While the year started on a buoyant note for Chennai with absorption of 1.6 million sq feet, the COVID-led situation, and an extended lockdown in the city resulted in lower levels of leasing in Q2 2020. On the supply front, Chennai recorded 3.6 million sq feet of supply, a rise of 88% from the corresponding period last year.
MUMBAI: LEASING FELL 53% YOY to 1.9 MSF AS OCCUPIERS POSTPONE DECISION MAKING
Mumbai witnessed the second-steepest fall in leasing during H1 2020 as the city witnessed an extended lockdown due to a high number of COVID-19 cases. The leasing fell 53% YOY to about 1.9 million sq feet, as majority of the workplaces in Mumbai continue to remain closed. Accordingly, supply during H1 2020 fell 37% YOY to 1.5 million sq feet in the city.
“The pandemic has made a short to mid-term impact that is leading occupiers to adopt measures like work from home, working in shifts at office, de-densification of workplaces, etc. However, in the longer run the ongoing situation may probably result into innovative solutions at workplace keeping employee health and safety at the core. We see large MNCs already gearing up, strategizing for the future workplaces to make them more advanced in terms of health and safety standards. Developers who have been thinking ahead have incorporated such features or wellness certifications in their projects, bound to be preferred by Occupiers”, said Animesh Tripathi, Senior Director, Office Services (Pune) at Colliers India.
PUNE: UPTICK IN LEASING BY 18%
Gross leasing in Pune rose 18% YOY to about 2.5 million sq feet during H1 2020. Pune is the only city that witnessed an uptick in leasing activity. Supply rose more than 10-fold compared to last year to about 3.2 million sq feet during H1 2020. The absorption and supply levels in the city were propelled in Q1 2020, which saw robust activity, before the COVID-19 led lockdown that unfavorably impacted the momentum in Q2 2020.
“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 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 India.
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