Office space leasing touch 10.9 million sq ft in top six cities: Report

NEW DELHI: Leasing activity across six major cities in India during the first half of 2021 dragged to a six-year low, according to a recent report by Savills India, an international real estate advisory firm.

In the January-June 2021 period, office absorption in six major cities stood at approximately 10.9 million sq ft, down by 38% from the corresponding months a year ago.

Bengaluru, Delhi-NCR and Mumbai constituted around 69% of the total leasing activity in H1 2021 across top cities of the country.

Bengaluru continued to lead with 4.1 million sq ft of leasing activity representing 37% share in H1 2021 followed by Delhi-NCR which witnessed leasing activity of 2.0 million sq ft recording a 37% year-on-year decline.

While Mumbai and Hyderabad shared third place with approximately 1.4 million sq ft absorption, the annual decline in leasing was sharper for Hyderabad at 46% compared to 39% for Mumbai.

Pune recorded approximately 0.9 million sq ft. leasing while, Chennai saw leasing activity of 1.1 million sq ft.

“The second wave of the pandemic has forced most organisations to reinstate their work from home policy once again dampening the overall sentiment of the office market. We believe this to be only a temporary pause, as amid the crisis, we did continue to see large lease deals being signed in key markets, symbolic of occupiers’ plans to return to office,” said Anurag Mathur, CEO, Savills India.

Despite the ongoing pandemic, the technology (IT) occupiers continue to lead the demand followed by BFSI segment. While the IT sector has increased absorption and holds a 51% of the share, their combined share of approximately 63% is same as in H1 2020.

The new supply rose by 4% at 18.0 million sq ft in H1 2021 from the year-ago period.

Bengaluru has recorded the highest infusion of new supply constituting a 36% share, followed by Hyderabad and Delhi-NCR at 28% and 22% shares, respectively.

In H1 2021, the overall vacancy levels increased to 16.2% at the end of June, as supply addition exceeded the pace of leasing activity. Prime locations with limited availabilities saw stable rents while a few micro-markets have seen a sharper decline as landlords exhibited flexibility to attract new clients.