Home News Colliers expects Grade A office rents to decline in 2021    

Colliers expects Grade A office rents to decline in 2021    

With new demand likely remaining slow in H1, Colliers expects Grade A office rents to decline in 2021, with overall rents dropping by 3.7% this year and showing improvements from 2023 onwards. According to Colliers, in 2021 occupiers should enter flexible leases to allow them to operate in a hybrid work-from-home model and keep their CAPEX low.

“Occupiers will continue to look for flexibility from developers as employees gradually return into offices in H1 2021. Managed office and enterprise solution players will play a key role in the overall take-up of offices spaces throughout 2021. Pragmatic migration towards a hybrid office portfolio should gain momentum amongst the occupier community. Expenses incurred for transporting employees towards office may get replaced with taking smaller offices closer to employee hubs or be in campuses with good transport connectivity,” said Bhupindra Singh, Managing Director, Regional Tenant Representation (India) at Colliers.

During 2020, office leasing activity remained sluggish as the uncertain economic environment and business conditions brought on by COVID-19 nudged occupiers to postpone their decisions and reassess their real estate portfolios. Net absorption across major markets in India was 20.6 million square feet (1.9 million sq meters), a decline of 42.8% YoY, the Colliers’ study said. Occupiers focused on portfolio optimization by relocating, consolidating and downsizing. About 45% of the demand was led by technology firms with larger companies still considering expansion in recently completed projects with better wellness and hygiene standards. As COVID-19 drags into 2021, transaction volumes likely to remain subdued over the first half. Colliers expect technology firms to continue to lead office space demand in Bengaluru, Hyderabad, Pune, Gurgaon and Noida, where some firms have announced plans to ramp up the hiring process.

During 2021, Colliers forecasts net absorption of 20 million sq feet (1.8 million sq meters), similar to 2020. After seeing a 42.8% decline in demand in 2020, its expected that in keeping with global trends, occupiers will optimise their portfolios in 2021 and 2022. Occupiers approaching lease expiration are undertaking portfolio optimization efforts by relocating to cheaper and/or smaller offices. For perspective, in 2021, leases expiring total about 81 million sq feet (7.5 million sq meters), with 65% of these being smaller than 10,000 sq feet (929 sq meters).

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