Gross office leasing across top eight cities in the country witnessed a strong recovery, registering 80 percent growth to 0.44 mn sq m in the third quarter of 2020. New office completions during the same period, reported recovery of 126 percent to 0.33 mn sq m compared to second quarter of 2020, Knight Frank India’s quarterly report titled India Real Estate Update - Q3 2020, said.
As Q2 2020 was marred by lockdown, the report cited the need to evaluate commercial market recovery compared to pre-COVID levels. Thus, besides looking at a single period, i.e. Quarter on Quarter analysis, Knight Frank India established a comparative matrix of Q3 2020 recovery against the quarterly average number of transactions in the year 2019.
The total office transactions of the eight markets in Q3 2020 have improved and reached 33 percent of the 2019 quarterly average level. Chennai, National Capital Region (NCR), and Mumbai recorded higher recovery in Q3 2020 with transactions reaching the level of 57 percent, 43 percent and 42 percent respectively of the quarterly average of the year 2019, the report said.
New completions also improved to 29 percent of the 2019 quarterly average. In terms of new completions in Q3 2020, Ahmedabad was the only market to report higher new office completions, 125 percent of quarterly average levels of the year 2019, the report said.
In terms of rental values, the recovery in office transactions and new completions helped rental values remain stable in Bengaluru (4%) followed by Hyderabad (2%), Chennai (0.5%), and Pune with 0% year-on-year growth (YoY), the report said.
“At the beginning of the pandemic in India, businesses were compelled to move to work from home as a business continuity process method. The uncertain business environment that followed the initial lockdown, further caused occupiers to assess their office space strategies leading many to postpone their office expansion plans till Q2 2020,” said Shishir Baijal, chairman and managing Director, Knight Frank India.
However, with the unlocking in progress, going forward as India edges back economic recovery, the office market dynamics are also expected to improve. The recent success of REITs can be understood as an indicator of long – term confidence of investors for office space, he said.
“While work from home as a concept has proved to be an effective business continuity measure, we expect occupiers to look at office space usage more strategically. This will lead to further innovation in effective to include aspects like social – distancing, health benefits, sustainability as well as preparedness for future contingencies. We expect the momentum of transaction to accelerate in the near future,” said Rajani Sinha, chief economist and national director – Research, Knight Frank India.
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