According to property consultant, JLL, India’s office market continues to recover witnessing a net absorption of 8.27 million sq ft, an increase of 52% in Q4 2020 (Oct-Nov-Dec) when compared to Q3 2020. Except for Bengaluru, net absorption of office spaces improved in the other six cities (Chennai, Delhi NCR, Hyderabad, Kolkata, Mumbai, Pune) says JLL Research. Hyderabad led the pack with the highest net absorption in Q4 2020. While the southern markets of Bengaluru and Hyderabad accounted for more than 50% of the net absorption in Q4 2020, maximum increase in net absorption (when compared to Q3 2020) was witnessed in Mumbai, Delhi NCR and Chennai. Kolkata also witnessed a strong resurgence albeit on a lower base.
According to JLL, 56% new completions were already pre-committed. Moreover, office occupiers usually take a longer-term view while making leasing decisions and many occupiers are utilising the current situation to get attractive deals from landlords. While IT/ITeS continues to form a majority proportion, leasing activity is being driven by increased demand for office spaces from sectors such as e-commerce, healthcare and FMCG.
“The year 2019 saw historic highs with net absorption crossing 46 mn sq ft. In 2020, net absorption dipped by 44% when compared to 2019. However, a comparison to the average annual net absorption levels between 2016 and 2018 elucidates a more realistic and thus resilient nature of the Indian office market. Led by the southern markets of Hyderabad, Chennai and Bengaluru, net absorption levels in 2020 reached 81% of what was observed between 2016 and 2018,” said Ramesh Nair, CEO and Country Head, JLL India. “Notably, net absorption in Hyderabad crossed the average annual levels witnessed during that same time frame,” he added.
The office real estate market was most impacted as lockdown measures disrupted the way we work. Corporates had to adopt work-from-home as an alternative, which brought in its wake, a new set of possibilities and challenges. Perceptions around the scale and potential of remote working changed. Earlier, the view was that remote working as a concept would not work in India. This changed with the remote working experiment proving to be fairly successful for a majority of the organisations. However, that does not mean that work from home presents a sustainable long-term solution for all corporates. It presents several physical and cultural challenges, more so for a country like ours with a large proportion of employees staying in multi-generational households. Work from home could be, at best, a supplement to the traditional way of working from office and could impact the office market demand by an estimated up to 20% in the medium to long term. This dip will be counter-balanced by increasing demand for office spaces from emerging sectors like healthcare, e-commerce and data centres. De-densification and splitting of offices are expected to further drive demand.