PremiumBENGALURU: Office space leasing in January-June 2021 fell 38% year-on-year to 10.9 million sq ft in India's top cities, dragging leasing activity to a six-year low, as occupiers stalled expansion and extended work-from-home options due to the severity of the second wave, according to a new report by property advisory Savills India.
The April-June quarter took a sharper hit, with absorption falling 65% from the March, which had started showing signs of recovery.
Bengaluru, the country’s most preferred tech-driven commercial office destination, led leasing momentum with 37% share of the overall absorption in the first six months of 2021, while Pune saw lowest leasing volume and largest decline among the top six cities.
"2021 started out on an optimistic note with businesses picking up and normalcy in sight. However, the second wave of the pandemic and the subsequent lockdowns forced most organisations to reinstate their work from home policy dampening the overall sentiment of the office market. But I believe this is only a temporary pause. With the advent of a strong vaccination drive across the country and India’s office market being fundamentally driven by a booming IT sector, I’m hopeful that we will be able to come back on the earlier growth track sooner than later," said Anurag Mathur, CEO, Savills India.
In first half of 2021, overall vacancy levels rose to 16.2%, as supply addition exceeded the pace of leasing activity. Prime locations with limited availabilities saw stable rents while a few micro-markets saw a sharper decline as landlords exhibited flexibility to attract new clients.
Information technology (IT) occupiers continue to lead demand, followed by banking, financial services and insurance (BFSI) segment, the report said. While the IT sector has increased absorption and holds a 51% of the leasing share, their combined share of approximately 63% is the same as in H1 2020.
According to the report, Bengaluru, Hyderabad, Mumbai, and Pune witnessed an increase in new project completions compared to the same period last year, on account of deferred supply getting completed. Bengaluru has recorded the highest infusion of new supply constituting 36% share, followed by Hyderabad and Delhi-NCR at 28% and 22% respectively.
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