Despite uncertainties, Bengaluru to lead cities in office space demand: Savills India

Bengaluru | Updated on August 31, 2020

Despite Bengaluru’s comparatively healthy leasing activity in first-half (H1) of calendar year 2020 on a country-wide level, there has been a drop of over 60 per cent demand when compared to last year’s leasing - 3.3 million square feet vs 8.5 million square feet.

“The lower demand was on account of business uncertainties during the period of complete lockdown,” said Sarita Hunt, MD, Bengaluru, Savills India.

She further said “With the unlocking process and resumption of construction as well as increased client activity, we expect H2 2020 to usher in healthy leasing activity and completion of projects. However Bengaluru will continue to be the frontrunner in office space demand owing to the booming IT and start-up industry.”

Savills India released its India Market Watch Office – H1 2020 on Friday. About 70 per cent of the leasing activity has come from captive clients and there was a drop in SEZ space take up by about 85 per cent.

On the supply front, on account of the Covid-19 pandemic related issues, there has been a reduction in additional supply in H1-2020, as compared to H1-2019.

According to Savills India “Around 4.3 million square feet of additional stock was delivered in the city market in H1-2020, with a majority of this supply being completed in Q2-2020.”

Of the total incremental supply, 3.5 million square feet was added in East Bengaluru – ORR, Brookefiled and Whitefield. This is in line with the micro-market wise demand for office space as well. At the end of H1-2020, the total stock in the city stood at around 162 million square feet.

In the beginning of the year, the Bengaluru market was projected to have an additional stock of 17.3 million square feet. However, a shortfall is expected due to the current pandemic- the supply addition in 2020 is expected to be in the range of 10-13 million square feet.

Vacancy levels in the city have been range-bound between 6-7 per cent. ORR, Central and Secondary Business Districts continue to have negligible vacancy (less than 3 per cent) due to demand for premium grade buildings in these micro-markets.

Average rentals have remained steady across all areas of the city. As far as sectoral demand is concerned, manufacturing and BFSI sectors increased their space take-up during this period. IT and co-working sectors continue to occupy the top 2 positions at 35 per cent and 17 per cent respectively.

Published on August 31, 2020

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