Office market in top eight cities record transactions of 22.2 mn sq ft in the July-December 2020 period: Knight Frank report

The office market in top eight cities recorded transactions of 22.2 mn sq ft in the July-December 2020 period, whereas new completions were recorded at 17.2 mn sq ft in the same period.

With the return to normality, gross leasing revived to 31% of the quarterly average of 2019 in Q3 2020, eventually surging to 115% in Q4 2020, a report by Knight Frank India titled Real Estate: H2 2020 has said.

The year began on a high note with office leasing achieving 96% of the quarterly average of 2019 in Q1 2020, the report said.

However, the government-imposed lockdown to combat the fury of the pandemic, led to temporary economic inactivity and translated into a sharp fall in office leasing activities in Q2 2020. With the return to normality, gross leasing revived to 31% of the quarterly average of 2019 in Q3 2020, eventually surging to a staggering 115% in Q4 2020, it said.

Office transactions for the eight cities grew by 271% in Q4 2020

Mapping the performance on a quarter-on-quarter (QoQ) basis, office transactions for the eight cities grew by a massive 271% in Q4 2020 to 17.5 mn sq ft as against 4.7 mn sq ft in Q3 2020. Pre-commitments contributed 24% of the total transacted volume of 1.63 mn sq m (17.5 mn sq ft) in Q4 2020, signifying that businesses are re-initiating expansion plans in the new normal, the report said.

In terms of the share of sectoral occupiers, Information Technology (IT/ITeS) sector dominated with a 41% share in H2 2020, followed by BSFI and manufacturing sectors with 16% each, while other services and co-working sectors recorded 17% and 10% respectively.

Bengaluru witnessed a surge of 8% year-on-year (YoY) to 7.5 mn sq ft in H2 2020 in leasing activities. This growth can be attributed to large occupiers who remained committed to their long-term business expansion plans. Among the occupiers Information Technology sector dominated markets. Bengaluru, Hyderabad, Pune and Chennai saw an unprecedented spike in QoQ transacted volumes during Q4 2020 at 459%, 640%, 919% and 227% respectively.

“The commercial office space has arguably been the best performing property type during this decade. Economic upheavals brought about by the pandemic had broken its momentum in 2020 temporarily. With the possibility of a viable vaccine being made available soon, occupiers have renewed their search for expansion opportunities as evidenced by the strong transaction activity in Q4 2020,” said Shishir Baijal, Chairman and Managing Director, Knight Frank India.

Knight Frank believes that while the events of 2020 may hasten the evolution of the office space into a more flexible, sustainable and wellness-oriented environment in the long run, it is unlikely that the need for traditional office space will reduce in the foreseeable future, he added.

“There has been a very strong resurgence in office demand in Q4 2020, despite most corporates adopting to work-from-home during the pandemic. There has been increased pre-commitment activities in Q4 2020, reflecting that corporates have started planning their office expansion plans. Going forward, as things return to normalcy, corporates will experiment with hybrid work models. So even while they give more flexibility to the employees to work from anywhere, that will not result in lower office demand,” said Rajani Sinha, Chief Economist and National Director Research, Knight Frank.