Real Estate

Covid-19 wrecks havoc on Bengaluru’s office space deals

Anil Urs Bengaluru | Updated on July 16, 2020

Bengaluru has been at the pinnacle of office demand in the country for each year during the last decade

Office transactions decline 42%, new supply falls 48%

Due to the adverse impact of Covid-19 pandemic on Bengaluru, the city’s office transactions have declined by 42 per cent year-on year (YoY) to 4.8 million sq ft in first half (H1) of 2020. New office supply was also hit and saw a decline of 48 per cent YoY to 4 million sq ft. The city experienced a tapered rent growth with the first half recording 6 per cent YoY growth in weighted average rent.

Bengaluru office market was on a very strong footing with a robust momentum in demand, supply and rent until the first-quarter of calendar year 2020. However, as businesses faced disruptions in the wake of the pandemic in second-quarter of the calendar, the Bengaluru office market also felt the pain and went into decline mode, Shantanu Mazumder, Senior Branch Director, Bangalore, Knight Frank-India, told Business Line.

Knight Frank-India, which released its 13th half-yearly report — India Real Estate: H1 2020 — on Bengaluru revealed that the IT sector, the most prominent occupier group, saw demand decline by 64 per cent in H1. Ongoing deals faced delays and new office enquiries were put on temporary hold. While we do recognise the potential of the Bengaluru office market, recovery will depend on the trajectory of the pandemic itself, he added.

On the residential market front, home sales have witnessed a decline of 57 per cent YoY to 12,177 units. Home launches saw a 48 per cent YoY decline to 10,806 units. With a weaker pricing environment in the wake of pandemic and consequent disturbance on home buyer sentiments, the city recorded a marginal 3.3 per cent increase in weighted average price.

According to Mazumder, Bengaluru has been at the pinnacle of office demand in the country for each year during the last decade. The city’s office market has grown each successive year since 2013 and with 15.3 million sq ft the city recorded its highest ever tally of office transactions, cited as an achievement milestone for any market in the country.

“However the vacancy level in the Bengaluru office market has jumped to 6.5 per cent in H1 2020 from a much comfortable 4.1 per cent level in H1 2019. Rent growth has been strong in Bengaluru for the last five years and the similar trend was observed in the beginning of 2020, until March 2020,” he added.

Since April, rents have stagnated with occupiers also seen reaching out to landlords for partial rent or maintenance cost waiver for the lockdown period. In this background, H1 recorded a rental growth of 6 per cent YoY.

Bengaluru’s PBD East market saw the highest rental growth of 9 per cent YoY in 12-month change, followed by SBD (8 per cent) and ORR (6 per cent).

Published on July 16, 2020

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