Office space leasing falls to a six-year low in first half of 2021
THE SECOND WAVE OF THE PANDEMIC FORCED ORGANIZATIONS TO REINSTATE THEIR WORK-FROM-HOME POLICY
BENGALURU: Office space leasing activity in top cities in January-June 2021 fell by 38% to a six-year low of 10.9 million square feet (sq. ft) from 17.6 million sq. ft in the corresponding period of the previous year.
This comes as occupiers put expansion on hold and extended work-from-home options because of the severity of the second Covid-19 wave, according to the ‘India Market Watch’ report by property advisory Savills India.
Absorption in the June quarter fell by 65% compared to the March quarter, which had started showing green shoots of recovery.
Bengaluru, the country’s most preferred tech-driven commercial office destination, led leasing momentum with 4.1
million sq. ft, about 37% of the overall absorption in the first six months of 2021, while Pune saw the lowest leasing volume and largest decline among the top six cities.
“There was an optimistic note to the start of 2021 with businesses picking up and normalcy in sight. However, the second wave of the pandemic and the subsequent lockdowns forced most organizations to reinstate their work-from-home policy, dampening the overall sentiment of the office market. However, I believe this is a temporary pause. With the strong vaccination drive across the country and India’s office market being fundamentally driven by a booming IT sector, I’m hopeful that we will be able to come back to the earlier growth track sooner rather than later,” said Anurag Mathur, chief executive officer, Savills India.
In the first half (H1) of 2021, the overall vacancy levels increased to 16.2%, as supply addition was faster than leasing activity.
Prime locations with limited availabilities saw stable rents while a few micro-markets have seen sharp declines as landlords exhibited flexibility to get new clients.
Physical occupancy in offices has been significantly low since the outbreak of the pandemic last year but was inching towards normalcy at the beginning of this year. However, the second wave has again not only created uncertainty in the demand for office space, but also dampened the keenness of
large multinational occupiers to take up new space in India.