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COVID-19 impact: Net leasing of office space plummets 73% in April-June

Cities like Delhi NCR and Bengaluru saw negative absorption which also pushed the overall net absorption downwards,

Representative image
Representative image

The coronavirus pandemic adversely impacted net leasing of office space causing a sharp dip of 73.4 percent in the April-June period across eight major cities, a report by Cushman & Wakefield has said.

“The net absorption in Q2 2020 stands at 3.72 msf, which is lower by 49.5% on a quarterly basis and 73.4% lower on a yearly basis as fresh transaction activity was muted during the quarter,” the report titled India Office Report for Q2 (April - June 2020) said.

Also, cities like Delhi NCR and Bengaluru have seen negative absorption which also pushed the overall net absorption downwards. Hyderabad, Mumbai and Chennai have contributed significantly towards net absorption with a share of 47.3 percent, 44.3 percent and 14.1 percent, respectively, mainly due to projects with significant pre-commitments becoming operational during the quarter which resulted in improved overall net absorption.

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Net absorption of office space stood at 37.15 lakh square feet during April-June 2020 as against 139.85 lakh sq ft in the year-ago period as corporates and co-working players deferred their expansion plans, the property consultant said.

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In Q2, Southern cities of Bengaluru, Hyderabad and Chennai were the most active markets with 30.1 percent, 22.2 percent and 17.7 percent shares in gross leasing volumes, respectively.

On a half-yearly basis, Bengaluru led the charts with 24.4 percent share followed by Delhi-NCR and Mumbai with share of 21.4 percent and 17.1 percent share, respectively. Only Chennai has seen QoQ growth in gross leasing whereas as all the cities has seen drop in gross leasing on a yearly and a half yearly basis.

The completion activity also remained slow during the second quarter, resulted in 7.54 mnsf of supply being added, which was lower by 23.8 percent on QoQ basis. On a YoY basis, new completions were down by 49.9 percent and 43.8 percent on a half-yearly basis.

Hyderabad led the way with a 40.5 percent share of new supply, followed by Mumbai, Delhi NCR and Pune with 21.6 percent and 12.0 percent share respectively. Whereas, on a half-yearly basis Bengaluru holds the maximum share with 27.0 percent share, followed by Hyderabad and Delhi NCR with 23.2 percent and 17.6 percent share.

In terms of leasing activity in Q2, the IT-BPM sector continued to witness maximum share with 43.0 percent share in overall leasing. Healthcare and pharma accounted for 18.6 percent share followed by captive centres (GCCs) with a 10.1 percent share. The IT-BPM sector on a half-yearly basis also seen the maximum share, it said.

The pre-commitment activity was 3.41 msf compared to 2.25 msf in the previous quarter, on the back of improved pre-leasing activity in Bengaluru and Hyderabad. This points towards healthy medium-term forecasts for the sector’s recovery as occupiers commit to space take-up based on future growth plans. Bengaluru led with a 43 percent share, followed by Hyderabad with 39 percent share, Delhi NCR with 11 percent share and Chennai with 7 percent share.

As the world got more engaged to deal with the impact of coronavirus, the resilience of commercial real estate in India was tested. This is reflected in the dwindling demand and supply numbers in H1 2020.

However, key markets in the southern cities show the highest level of activity during Q2, with Bengaluru leading the pack, said Anshul Jain, Managing Director – South East Asia and India.

“In an ever-evolving situation, it may be difficult to predict the timeline within which commercial real estate in India might be able to restore its pre-COVID growth momentum. But, a certain level of normalcy could be expected in H2 as companies gradually resume their operations,” he said.
First Published on Jul 8, 2020 06:49 pm
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