According to leading property consultants, JLL and Savills, new supply of office space fell 30-35 per cent year-on-year in 2020 across major cities mainly on lower demand because of the COVID-19 pandemic. While JLL India reported that new supply of office space across seven major cities declined 30 per cent to 36.34 million sq ft in 2020 from 51.62 million sq ft in the previous year, Savills has reported that the fresh supply dropped to 30.6 million sq ft from 47.1 million sq ft across six big cities.
New office space supply was less impacted than the demand, which fell by around 45-50 per cent with corporates deferring their expansion plan and adopting work-from-home policy for employees. The supply was also hit due to the nationwide lockdown that brought all construction activities to a standstill during April-May.
As a result, JLL said the vacancy level of office space increased to 14 per cent in December from 12.8 per cent in March 2020. As per Savills data, the overall vacancy level marginally increased to 11.7 per cent in 2020 as new supply exceeded the pace of leasing.
On the demand side, both JLL India and Savills India reported steep fall in leasing activities of office space. Net leasing fell 44 per cent during 2020 to 25.82 million sq ft from a record 46.5 million sq ft in the previous year across Delhi-NCR, Mumbai, Chennai, Kolkata, Hyderabad, Pune and Bengaluru, according to JLL India. In Savills database, leasing of office space fell to 27.4 million sq ft in 2020 from 55.7 million sq ft across six cities. Savills research has not captured the Kolkata market.
According to JLL, strong market fundamentals, sustained IT sector growth, increasing demand from sectors such as e-commerce, healthcare, FMCG and the increasing presence of institutional investors will continue to drive the office market.