Office leasing in top six cities at 27.4 mn sqft in 2020: Savills India
Office space absorption across India’s six major cities stood at 27.4 mn sqft in 2020, led by Bengaluru which showed strong resilience amid the global pandemic that severely impacted business activities across sectors, according to international property consultancy firm Savills India.
After a record high in 2019, overall office leasing in 2020 saw a drop of almost 51 per cent as compared to the previous year. While office absorption in 2019 stood at 55.7 mn sqft (57.7 mn sqft including pre-commitments), the previous year saw around 47.3 mn sqft.
Interestingly, of the total office leases in 2020, around 57 pc comprised large deals of more than 100,000 sqft a deal, showed data assessed by Savills India.
Bengaluru posted maximum office absorption with 6.8 mn sqft space take up in 2020. Despite a drop of 56 pc as compared to last year, the city led the overall leasing across the top six cities. Following Bengaluru closely, Hyderabad registered leasing of 5.4 mn sqft in 2020.
Hyderabad took over NCR while the latter stood at the third place with approx. 4.4 mn sqft absorption in 2020. Like the previous year, the top three cities of Bengaluru, Hyderabad and NCR constitute around 61 pc of the total leasing activity in 2020 as well.
Savills India also pointed out that Mumbai recorded approximately 2.9 mn sqft leasing through the year – the least absorption witnessed among the six cities, while Chennai witnessed a decline of just below 29 per cent.
“The overall story of 2020 is the one of survival, and most markets did exactly that. While the story of Indian office market in 2020 may not be as glorious as it was in 2019 and 2018, it still continues to strive and display resilience, in the face of COVID-induced slowdown. The fundamentals of Indian economy remain intact and we continue to witness strong leasing traction in sectors like warehousing and industrial. Now with vaccine in sight and businesses poised to gain momentum, we can expect to reach pre-COVID 19 levels soon,” said Anurag Mathur, CEO, Savills India.
In terms of sectoral take-up, IT continues to remain the major occupier of office market constituting 51.7 pc of total leasing in 2020 as compared to 46.3 pc in 2019. Similarly Banking, Financial Services and Insurance (BFSI) occupiers’ share in 2020 was higher at 14.3 pc compared to 10.6 pc in 2019.
Engineering and manufacturing, as well as transport and logistics, two of India’s growing sectors accounted for 7.8 pc and 3 pc respectively, which was more than double of their respective shares in 2019. These two recorded a Y-O-Y growth in terms of space take -up in 2020 unlike any other segments. On the other hand, co-working segment’s share declined to 8.5 pc in 2020 from 14 pc in 2019 as a result of occupiers widely adopting work from home policy.
“IT and ITes remain major drivers of office market in India. Though for most part of the year, occupiers strongly practiced the ‘Work from Home’ concept to ensure safety of their employees, office market saw some large-scale transactions. Sectors such as engineering and manufacturing, as well as transport and logistics even increased their share of the pie giving rise to the hope that the Indian office market space has weathered the storm and will come out of this stronger expecting a robust growth in 2021” said Arvind Nandan, Managing Director, Research and Consulting, Savills India.
SUPPLY, VACANCY & RENTS
The year 2020 saw a 35 per cent Y-O-Y decline in new completions, with NCR, Pune and Mumbai saw a drop of 60 per cent. Bengaluru and Hyderabad saw relatively lesser decline of 14 pc and 21 pc respectively. Interestingly, Chennai maintained a similar level of completions at about 3.6 mn sqft during 2020. Bengaluru, Hyderabad and NCR together comprised 80 pc of new completions this year as most supply that had come was committed in previous year(s).
The overall vacancy levels have marginally increased to 11.7 pc in 2020 – on a pan-India average – as new supply has exceeded the pace of leasing.
The rental value change across micro-markets varied within a city compared to last year, with an average decline of about 7 pc Y-O-Y in NCR, while Chennai and Hyderabad saw a 3 pc Y-O-Y decline. However, Mumbai and Pune markets sustained similar rental ranges as last year. It is important to note about Mumbai, despite its low leasing volumes, its vacancy fell by only 1 per cent from 2019 and delicately balancing its rentals at the same levels.
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