NEW DELHI: Office space absorption in six major cities dropped to 13.7 mn sq ft in the first half of 2020 as compared to 32 million in the corresponding months a year ago, according to a report by property consultant Savills.
The demand continues to be driven by BFSI and IT across all the cities, with Mumbai experiencing a substantial 36% from consulting firms.
Except Mumbai, all other markets in the COVID and lockdown phase remained dependent on three core sectors – BFSI (Banking Financial Services and Insurance), Technology and Manufacturing.
“The pandemic has led to a temporary blip in the growth story of India’s office market and expect to see a strong recovery by next year. The inherent demand of office space in India continues to remain intact as we believe that the economic fundamentals of this country continue to be strong,” said Naveen Nandwani, Managing Director (Commercial Advisory & Transactions), Savills India.
Savills said that this pattern may change during the second half, if the pandemic led crisis persists, India’s focus on its traditional sectors may need to increase, necessitating vital policy initiatives as well.
The cumulative supply addition was 13.5 mn sq ft in H1 2020, compared to 26.6 mn sq ft of H1 2019.
In terms of leasing activity, 2019 was exemplary for Delhi NCR; absorption stood at 10.9 mn sq ft. Strong traction in demand was expected to continue in 2020 as well.
According to the report, pandemic and consequential lockdowns acted as dampeners as delay in decision making have culminated into lesser absorption.
H1 2020 leasing activity in NCR stood at 1.8 mn sq ft, an annual decline of over 70%.
Bengaluru, which has been the frontrunner in office space demand for years, witnessed 3.3 mn sq ft of leasing activity, which represents almost 35% of office space demand in the top 6 cities of the country.
“The first half of 2020 has been shaped by the ongoing pandemic. The growth momentum of commercial real estate has been temporarily halted, leading to a decline in the total leasing activity of office space in the country by almost 60% in H12020 as compared to H12019,” said Arvind Nandan, MD (Research & Consulting) Savills India.