Fresh wave of coronavirus cases slows down office space leasing, firms put plans on hold

Corporates are again going to wait-and watch mode and putting the office space leasing decision on hold as the fresh wave of covid has created the uncertainty, according to property consultants.

Office space leasing has already been slow since the imposition of first lockdown and companies shifting to work from home for long term.

With the restriction in place in all the major markets, consultants feel this quarter will see limited activity

“Amidst the second wave in India – far more excruciating than the first – we are beginning to see IT companies again go into a wait-and watch mode and hold on to their real estate decisions. Leasing activity has tamed down,” said Prashant Thakur, Director and Head – Research, ANAROCK Property Consultants.

Developers and consultants feel the 2021 will be on the line of 2020 and office space leasing is expected to recover only in 2022. According to Anarock average vacancy levels in Grade A office space across the top 7 cities went up again in Q1 2021, breaching the 15% mark.

“Corporates are taking little more time in evaluating the deal with the fresh wave of covid cases bringing back the uncertainty. They are monitoring the situation and decision will be taken accordingly,” said Mudassir Zaidi , Executive Director – North, Knight Frank India.

Experts said that the partial lockdown in Maharashtra, and night curfew in Bangalore and three cities of NCR has forced the companies to move slow. Most of the pre-committed deals were closed in the quarter ending March.

“Individually, the rising Covid cases in cities like MMR and Bengaluru (the markets with highest commercial demand), followed by fear of another lockdown is a cause of concern and is likely to adversely impact commercial leasing activities in entire 2021 or until covid cases are reigned in,” Thakur said.

According to Thakur, the top four Indian IT/ITeS firms – TCS, Infosys, HCL and Wipro – alone hired approx. 42,000 employees in the first nine months of FY 2021. Also, multinational majors Cognizant and Capgemini hired nearly 39,500 employees in CY 2020, with bulk hiring plans for CY 2021.

“The IT/ITeS sectors are among the prime drivers of overall leasing activity in the top cities. Bulk hiring by these firms will influence the demand for large quality office spaces,” he said.

Despite increased flexibility and rostered work timings, firms will need to adopt de-densification measures to accommodate the new social distancing norms and increased health measures.

This is expected to increase per-employee space requirements from 80 sq. ft. space during pre-pandemic times to at least 120-130 sq. ft. per employee post COVID-19.

“Overall leasing in India will therefore remain lacklustre in 2021. The anticipation of a partial lockdown in some of the bigger cities will also cause commercial leasing to walk a tightrope this year,” said Thakur.