Office market net absorption up 32%
in second quarter of 2021: JLL
India’s net office absorption stood at 4.39 million sq. ft in the second quarter, representing 32% year-on-year
growth in major cities, according to JLL’s Office Market Update-Q2, 2021.
Given the strict nationwide lockdowns across the country in the second
quarter, net absorption dipped by 16% versus the previous quarter.
However, the quarter-on-quarter drop
was lower than the 61% during the same period last year when the first
wave of the pandemic hit, showing the market’s improved resilience.
Office absorption was more resilient during the second wave
|
City
|
Q1 2020
(mn sq. ft)
|
Q2 2020
(mn sq. ft)
|
Growth (%)
Q2 2020 over
Q1 2020
|
Q1 2021
(mn sq. ft)
|
Q2 2021
(mn sq. ft)
|
Growth (%)
Q2 2021 over
Q1 2021
|
|
Bengaluru
|
2.71
|
0.45
|
-83%
|
2.22
|
2.34
|
5%
|
|
Chennai
|
0.92
|
0.10
|
-90%
|
0.37
|
0.11
|
-70%
|
|
Delhi NCR
|
1.55
|
0.50
|
-68%
|
1.07
|
0.61
|
-43%
|
|
Hyderabad
|
0.92
|
1.18
|
29%
|
0.79
|
Negligible
|
-
|
|
Kolkata
|
0.02
|
Negligible
|
-
|
0.04
|
0.02
|
-60%
|
|
Mumbai
|
2.14
|
0.45
|
-79%
|
0.24
|
0.61
|
149%
|
|
Pune
|
0.36
|
0.64
|
77%
|
0.50
|
0.71
|
43%
|
|
Total
|
8.62
|
3.33
|
-61%
|
5.23
|
4.39
|
-16%
|
Source: Real Estate Intelligence Service (REIS), JLL Research
The
focus was on undertaking measures such as vaccination drives for
employees to ensure that they eventually come back to the office
is safe and sustainable.
The
overall market witnessed a net absorption of 9.63 million sq. ft in H1
2021, a decrease of 19% when compared to H1 2020. Markets of Bengaluru
and Pune accounted for nearly 60% of the net absorption
during H1 2021. Moreover, these two markets along with Kolkata were the
only ones which witnessed a growth in net absorption in H1 2021 when
compared to H1 2020.
Net absorption dipped by 19% in H1 2021
|
City
|
H1 2020
(mn sq. ft)
|
H1 2021
(mn sq. ft)
|
Growth
(%)
|
|
Bengaluru
|
3.16
|
4.55
|
44%
|
|
Chennai
|
1.02
|
0.48
|
-53%
|
|
Delhi NCR
|
2.05
|
1.69
|
-18%
|
|
Hyderabad
|
2.11
|
0.79
|
-62%
|
|
Kolkata
|
0.02
|
0.06
|
270%
|
|
Mumbai
|
2.59
|
0.85
|
-67%
|
|
Pune
|
1.01
|
1.21
|
20%
|
|
Total
|
11.94
|
9.63
|
-19%
|
Source: Real Estate Intelligence Service (REIS), JLL Research
“It is important to note that
pre-leasing commitments have been largely
intact and there has been limited downsizing activities by larger
corporates. Corporate occupiers are holding on to office spaces with the
belief that as vaccination drives accelerate,
occupancy at offices will start to improve. Furthermore, completions
during H1 2021 were recorded at 25.11 million sq. ft, an increase of
75% year-on-year, show that developers are confident of a strong revival
in office leasing activity once business
as usual is reinstated. In the second
half of the year, if the country can ensure that most of the active
workforce gets fully vaccinated, the shift back to office premises will
be more feasible and sustainable,”
said Rahul Arora Head of Office Leasing Advisory, JLL India.
New
completions in Q2 2021 were recorded at 11.67 million sq. ft., more
than double than that of Q2 2020. With the addition of nearly
12 million sq ft of space, the Grade A office stock in the top seven cities under consideration
crossed 650 million sq ft. During the first wave of COVID-19,
new completions took a hit due to the unavailability of labour. The
robust new completion level in Q2 2021 is indicative of the fact that
construction activity was not impacted significantly
during the second wave.
New completions at robust levels despite the second wave
|
City
|
Q1 2020
(mn sq. ft)
|
Q2 2020
(mn sq. ft)
|
Growth (%)
Q1 2021 over Q4 2020
|
Q1 2021
(mn sq. ft)
|
Q2 2021
(mn sq. ft)
|
Growth (%)
Q1 2021 over Q4 2020
|
|
Bengaluru
|
3.35
|
-
|
-
|
4.33
|
5.19
|
20%
|
|
Chennai
|
0.53
|
-
|
-
|
-
|
0.50
|
-
|
|
Delhi NCR
|
1.94
|
1.94
|
0%
|
4.01
|
1.22
|
-70%
|
|
Hyderabad
|
1.35
|
2.38
|
77%
|
2.20
|
1.64
|
-25%
|
|
Kolkata
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Mumbai
|
0.84
|
1.45
|
73%
|
2.18
|
2.54
|
16%
|
|
Pune
|
0.60
|
-
|
-
|
0.70
|
0.58
|
-17%
|
|
Total
|
8.61
|
5.77
|
-33%
|
13.43
|
11.67
|
-13%
|
Source: Real Estate Intelligence Service (REIS), JLL Research
“Compared
to the big dip that we had seen in the Q2 2020 due to the first wave,
the market showed more resilience in Q2 2021 when hit by the second
wave. The strength displayed by the office market in
India since the pandemic owes much to the fact that the IT/ITeS sector
has been largely unaffected by the economic downturn. IT/ITeS occupiers
continued to account for a majority of the office leasing activity in
2020 at around 50%. In 2021, we expect the
IT/ITeS sector to remain the key occupier group while demand from
emerging sectors such as e-commerce, manufacturing and healthcare is
likely to increase further,” said Dr. Samantak Das, Chief Economist and Head Research & REIS, JLL.
In
sync with net absorption, Bengaluru accounted for nearly 40% of the new
completions during H1 2021. This was followed by Delhi NCR which
accounted for 21% and Mumbai which witnessed
19% of the total new completions. New completions during H1 2021 were
recorded at 25.11 mn sq ft, an increase of 75% year-on-year.
New completions maintain growth in H1 2021
|
City
|
H1 2020
(mn sq. ft)
|
H1 2021
(mn sq. ft)
|
Growth
(%)
|
|
Bengaluru
|
3.35
|
9.53
|
184%
|
|
Chennai
|
0.53
|
0.50
|
-6%
|
|
Delhi NCR
|
3.88
|
5.23
|
35%
|
|
Hyderabad
|
3.73
|
3.84
|
3%
|
|
Kolkata
|
-
|
-
|
-
|
|
Mumbai
|
2.29
|
4.73
|
106%
|
|
Pune
|
0.60
|
1.28
|
115%
|
|
Total
|
14.38
|
25.11
|
75%
|
Source: Real Estate Intelligence Service (REIS), JLL Research
Vacancy in Grade A office space shot up to nearly 16%
|
H1 2018 (%)
|
H1 2019 (%)
|
H1 2020 (%)
|
H1 2021 (%)
|
|
Top 7 Markets
|
14.0%
|
13.3%
|
13.1%
|
15.8%
|
Source: Real Estate Intelligence Service (REIS), JLL Research
Due
to a steady pipeline of assets coming online, the demand-supply gap has
momentarily widened. Vacancy levels across the top seven markets
rose to nearly 16% at the end of the second quarter breaching the
comfort zone of 13-14% for the first time since 2017. Nevertheless, with
demand expected to pick up in the coming quarters, vacancy is likely to
return to sub 15% levels, believes JLL.
Rentals continue to remain rangebound
Office
rentals remained stable across the major office markets in India in Q2
2021. However, landlords continue to be accommodative to the demands of
occupiers and support deal closures.
With vacancy levels already hovering at around 16%, the next few
quarters will be critical in terms of pick-up in demand while
maintaining the market buoyancy as planned supply enters the market.
Occupiers remain optimistic about the future
The
resilience displayed by the office market in India since the pandemic
owes much to the fact that the IT/ITeS sector has been largely
unaffected by the economic downturn. IT/ITeS occupiers
continued to account for most of the office leasing activity in 2020 at
around 50%. In 2021, we expect the IT/ITeS sector to remain the key
occupier group while demand from emerging sectors such as e-commerce,
manufacturing and healthcare is likely to increase
further.
Taking cues from 2020, the second half of the year is expected to witness increased momentum in the office space. In 2021,
net office absorption across seven major
cities is likely to remain flat at around the levels of 25.6 million sq
feet achieved in 2020,
in case there are no further lockdowns. In a nutshell,
if vaccination targets are achieved and we do not see another major
outbreak of the virus, the year 2021 is most likely to close on an
encouraging note
