Covid-19: Second wave forcing cos to hold real estate decisions, says JLL India

The extraordinary challenges posed by the second wave of Covid-19 infections in the country is adversely impacting expansion plans of the corporates who are delaying their office space leasing decisions, a development that threatens to disrupt the commercial real estate (CRE) market’s golden run.

According to the Q1 2021 JLL India office market report, “Leasing momentum in the upcoming quarters will mainly depend on the time taken to contain the second wave of Covid cases.”

JLL India head of research, Samantak Das said, “While 2020 ended on a relatively high note, there was still uncertainty in the market for resumption of business as usual. Occupiers continued to adopt a cautious approach and focused on reassessing their real estate portfolios and long-term commitments.

“To add to the woes, increasing fears of a spike in Covid cases in the second half of March further pushed occupiers to press pause again and postpone their real estate decisions,” he added.

The CRE market has started feeling the heat of the rise in infections due to the pandemic with the government springing into action by imposing night curfews and lockdowns, which is likely to impact supply chains. India Ratings and Research (Ind-Ra) in a report on Thursday said Covid poses a moderate challenge to supply chains of various sectors.

This is also reflected by the rising Grade-A office space vacancy levels, which rose for the fifth straight quarter in Q1 2021. The vacancy levels grew from 12.8% in March 2020 to 14.9% in March 2021.

The overall office market witnessed a net absorption decline of 37% Y-o-Y in Q1 2021 at 5.53 million sq ft (MSF). On a sequential basis net leasing was fell 33% from 8.34 MSF in Q4 2020. Bangalore and Delhi NCR were the only two markets that witnessed an increase in net absorption in Q1 2021 compared to Q4 2020.

However, it is important to point out a few things that give confidence that there is light at the end of the tunnel, the report said noting that increasing attendance in offices across major markets before the second wave bears testimony to the confidence and commitment of corporates to get back to work from the office.

“As the vaccination drive is gaining momentum and occupiers remain cautiously optimistic, the year 2021 is expected to witness close to 38 MSF of new completions, while net absorption is likely to hover around the 30 MSF with a marginal downward bias. This will be at par with the average annual net absorption levels seen during 2016-2018,” Das said.