Covid-19 impact: Office space occupiers continued to be cautious, reassessing real estate portfolios

Anil Urs Bengaluru | Updated on April 08, 2021

Q1 space absorption down by 33% to 5.53 million sq ft Vs Q1 absorption of 8.24 million sq ft last year

Office space occupiers in the first quarter (Q1) of calendar 2021 continued to adopt a cautious approach and focused on reassessing their real estate portfolios and long-term commitments.

“For space occupiers, 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 Dr Samantak Das, Chief Economist and Head of Research & REIS, India, JLL.

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

Absorption decline

The overall office market witnessed a net absorption decrease of 33 per cent in Q1 2021 quarter-on-quarter (Q-o-Q), with 5.53 million square feet leased during January to March 2021 (in 2020 absorption stood at 8.24 million square feet), revealed the JLL Office Market Update – Q1 2021.

On a year-on-year (Y-o-Y) basis, net absorption in Q1 2021 stands at 64 per cent of the levels witnessed in Q1 2020. Bengaluru, Hyderabad and Delhi NCR accounted for nearly 80 per cent of the net absorption during the quarter. Moreover, Bengaluru and Delhi NCR were the two markets that witnessed an increase in net absorption when compared to Q4 2020.


Pre-commitments in new completions has played a significant role in driving net absorption. In Q1, 31 per cent of the new completions during the quarter was already pre-committed. Maximum pre-commitment levels were observed in the southern markets of Bengaluru (51 per cent of the new completions) and Hyderabad (45 per cent of the new completions).

Samantak Das said at the same time, it is important to note that the leasing momentum in some of the larger markets has remained promising in the Q1 of 2021. The quarter witnessed gross leasing volumes of 7.5 million square feet across the top seven markets.

“Interestingly, the larger market of Mumbai saw a massive jump in leasing volume from 0.5 million square feet in Q4 2020 to 1.6 million square feet in Q1 2021. This was majorly driven by select large pre-commitment deals in upcoming spaces within the BFSI space. Further, Delhi NCR saw a marginal increase in leasing volumes from 1.9 million square feet in Q4 2020 to 2 million square feet in Q1 2021,” he said.


Occupiers continue to review their real estate portfolios and are adopting consolidation and optimisation strategies to rationalise the space required while minimising costs. “The subdued net absorption levels could not keep pace with new completions. This resulted in overall vacancy increasing from 14 percent in Q4 2020 to 14.9 per cent in Q1 2021. Despite the rise in vacancy levels, Bengaluru, Chennai and Pune continued to hover in single digits,” explained Das.


Office rents in Q1 2021 remained stable across the major office markets in India. With vacancy levels still below 15 per cent and limited upcoming Grade A supply across key markets in the next few years, the office market in India continues to be tilted towards landlords.

Hence, reduction of headline rents is not a popular phenomenon and rents are expected to remain range bound in the short to medium term. However, landlords continue to be accommodative to the demands of occupiers and are providing flexibility via increased rent-free periods, reduced rental escalation and fully furnished deals to occupiers to close deals.

Published on April 08, 2021

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