Office space demand declines 48% in January-March 2021


Net leasing of office spaces across seven major cities reported a 48% annual decline in the January-March period of 2021, while the demand for flexible spaces increased, says a report by Cushman & Wakefield

Amid a dramatic surge in new Coronavirus infections in India, even after the launch of an inoculation programme to contain the pandemic, net leasing of office spaces across seven major cities reported a 48% annual decline in the January-March period of 2021, says a report by Cushman & Wakefield.

According to the report, net leasing in the seven markets, which include Bengaluru, Chennai, Hyderabad, Kolkata, NCR, Mumbai and Pune, fell from 69 lakh sq ft in January-March 2020 to 35 lakh sq ft in the same period of 2021. Most cities covered in the analysis showed a decline in net leasing, barring Pune, which showed an increase to 2,76,531 sq ft from 1,73,026 sq ft in the studied period.

 

Office space performance in Q12021: City-wise break up

CityGross leasing in million sq ftNet completions in million sq ftUpcoming supply in million sq ft
Bangalore2.393.588.95
Chennai1.572.811.04
Hyderabad13.04.00.6
Kolkata0.190.111.47
Mumbai2.960.4913.84
NCR2.052.6220.86
Pune1.150.2813.8

Source: Cushman and Wakefield.

See also: Impact of Coronavirus on Indian real estate

That notwithstanding, the demand for flexible spaces among companies has shown an upwards movement, from 10,690 seats in Q1 2020 to 15,520 seats during Q1 2021. “A sharp jump indicates that occupiers are relying on managed spaces, as a smart alternative in the current situation,” the report said.

“Since Q4 (October-December 2020) closed on a positive note for commercial real estate leasing business, the market was hopeful of a gradual return to ‘business as usual’ and the immunisation drive carried out by the government added much-needed confidence. Unfortunately, the sudden spike in the number of COVID-19 cases paused the momentum that the market had picked up,” said Anshul Jain, managing director (SE Asia and India) Cushman & Wakefield. Unless the government rolls out the vaccination drive for one and all, occupiers will continue to remain cautious and market activity is likely to remain muted, till the beginning of the second half of 2021, Jain added.

See also: Flexible workspaces to lease 3 million sq ft space in 2021

Earlier in April 2021, another property brokerage giant, JLL India, also reported a 36% decline in net leasing activity during the quarter, in the seven markets. In spite of an overall decline, net leasing of office space, the report also showed, grew in Kolkata, Hyderabad and Pune. The JLL report also said that office rents remained stable during the period.

“As the vaccination drive is gaining momentum and occupiers remain cautiously optimistic, the year 2021 is expected to witness close to 38 million sq ft of new completions, while net absorption is likely to hover around 30 million sq ft, with a marginal downward bias,” said JLL India chief economist and head (research and REIS), Samantak Das.

 

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