Despite COVID-19, Bengaluru was a top occupier location for technology companies. The IT city topped the charts with a net absorption of 0.5 million square meters in H1 2020. It was also Asia Pacific’s second largest Grade A office market by stock after Tokyo, says a new report.
Bengaluru saw gross absorption of 172,000 sq m in the second quarter. Delhi-NCR was also firm, although Mumbai slowed down noticeably, says a report by Colliers International.
Over the first half of 2020 as a whole, the biggest drivers of new supply in Asia Pacific (APAC) were Indian cities, the report said.
At least seven major Indian cities saw gross leasing fall by only 36 percent over H1 2020 as a whole despite a lengthy national lockdown. Bengaluru led the way with new supply of 641,000 sq m, followed by Delhi-NCR at 445,000 sq m.
While the bulk of this new supply represented projects in the final stage of completion that had been held back from 2019, it is surprising that so much activity took place in India despite a national lockdown. Other major drivers of supply included Melbourne CBD, where 218,000 sq m of new office stock (all grades) were delivered over the first half of the year, the report said.
“Bengaluru continues to remain the strongest market for office leasing, backed by a historic absorption in 2019. The city has shown resilience in H1 2020 by being at the top despite a slowdown due to the lockdown. Over the period 2022-24, growth in office space demand in APAC will be led by both India and China. We anticipate most south India markets to see sharp recoveries and growth in 2021 in comparison with 2020,” said Arpit Mehrotra, Managing Director, Office Services (South India) at Colliers International India.
Going forward, for Bengaluru, Colliers predicts new supply of 1.9 million sq m in 2020, up 24 percent year-on-year. For Delhi-NCR, it predicts new supply of 1.68 million sq m in 2020, up more than three times from 2019 and the highest level in three years.
If COVID-19 spreads further in India, development projects may see delays, but this did not happen in the first half, the report noted.
As for outlook for the next five years, Colliers expects new supply in Bengaluru and Delhi-NCR to ease from the high levels of 2020, but to remain above 1 million sq m annually. In contrast, it expects new supply in Mumbai to settle at around 540,000 sq m per annum.Rents should start to pick up in 2021Rents are expected to increase marginally from this year’s lows in 2021 as the forecasted economic recovery becomes evident. Over the next five years, Singapore, Bangkok and Bengaluru should see rents increase by 3 percent or more, while Delhi-NCR, Auckland, Melbourne and Taipei should see rents increase in excess of 2 percent as demand catches up with planned supply.Steady vacancy levels with tight demand and supply should support increasing rents in these markets, the report added.