Net absorption in office market dips 33% at 5.53 million sq ft in Q1 2021: JLL – ET RealEstate

NEW DELHI: The overall office market in India witnessed a net absorption decrease of 33% in Q1 2021 quarter-on-quarter (Q-o-Q), with 5.53 million sq ft leased during Jan to March 2021, according to a recent report by JLL India.

Bengaluru, Hyderabad and Delhi NCR accounted for nearly 80% of the net absorption during the quarter. Moreover, Bengaluru and Delhi NCR were the two markets which witnessed an increase in net absorption when compared to Q4 2020.

“While 2020 ended on a relatively high note, there was still uncertainty in the market with respect to 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-19 cases in the second half of March further pushed the occupiers to press pause again and postpone their real estate decisions,” said Samantak Das, chief economist and head of research & REIS, India, JLL.

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

Pre-commitments in new completions played a significant role in driving net absorption. In the first quarter, 31% of the new completions during the quarter was already pre-committed. Maximum pre-commitment levels were observed in the southern markets of Bengaluru (51% of the new completions) and Hyderabad (45% of the new completions).

Interestingly, the larger market of Mumbai saw a massive jump in leasing volume from 0.5 million sq. ft in Q4 2020 to 1.6 million sq ft in Q1 2021. This was majorly driven by select large pre-commitment deals in upcoming spaces within the BFSI space.

Delhi-NCR saw a marginal increase in leasing volumes from 1.9 million sq ft in Q4 2020 to 2 million sq ft in Q1 2021.

New completions during Q1 2021 were recorded at 13.43 million sq ft, a marginal increase of 5% q-o-q. In sync with net absorption, the markets of Bengaluru, Hyderabad and Delhi NCR accounted for nearly 80% of the new completions during the quarter.

On a Y-o-Y basis, new completions across the top seven cities jumped by 56% from the 8.6 million sq ft recorded in Q1 2020. Interestingly, new completions even surpassed the average quarterly levels of about 13 million sq ft witnessed during 2019.

The subdued net absorption levels could not keep pace with new completions. This resulted in overall vacancy increasing from 14.0% in Q4 2020 to 14.9% in Q1 2021.



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