Real Estate

H2 sees resurgence in office space market: Knight Frank

Our Bureau Hyderabad | Updated on January 06, 2021

Office space investments offer stable annual cash flow and capital appreciation thereby offering attractive returns for HNIs

Office transactions in the top eight cities grew to 17.5 mn sq ft in Q4 2020 as against 4.7 mn sq ft in Q3 2020

The country’s office market in the top eight cities recorded 22.2 mn sq ft transactions in the second half (H2) of 2020, showing a resurgence in the office market.

According to the Knight Frank India India Real Estate report released today, 2020 began on a high note with office leasing achieving 96 per cent of the quarterly average of 2019 in Q1 2020. With the return to normality after the Covid lockdown, gross leasing revived to 31 per cent of the quarterly average of 2019 in Q3 2020, surging to a staggering 115 per cent in Q4 2020.

The report notes that home sales in India and the top eight cities was 94,997 units during H2 2020. Office transactions for the eight cities grew by 271 per cent in Q4 2020 to 17.5 mn sq ft as against 4.7 mn sq ft in Q3 2020. Pre-commitments contributed 24 per cent of the total transacted volume of 1.63 mn sq m (17.5 mn sq ft) in Q4 2020, signifying that businesses are re-initiating expansion plans in the new normal.

Shishir Baijal, Chairman and Managing Director, Knight Frank India said, “Commercial office space has arguably been the best performing property type in this decade. Economic upheavals brought about by the pandemic had broken its momentum in 2020 temporarily. With the possibility of a viable vaccine being made available soon, occupiers have renewed their search for expansion opportunities as evidenced by the strong transaction activity in Q4 2020.”

Knight Frank believes that while the events of 2020 may hasten the evolution of space into a more flexible, sustainable and wellness-oriented environment in the long run, it is unlikely that the need for traditional office space will reduce in the foreseeable future.

Rajani Sinha, Chief Economist and National Director Research, Knight Frank said: “There has been a very strong resurgence in office demand in Q4 2020, despite most corporates adopting Work From Home during the pandemic. Going forward, as things return to normalcy, corporates will experiment with hybrid work models. So even while they give employees more flexibility to work from anywhere, that will not result in lower office demand.”

Hyderabad office market

Despite the supply challenges owing to the Covid-induced lockdowns and mass exodus of labour in Q2 and Q3 2020, Hyderabad’s office market recorded the second highest annual supply numbers in 2020 -- 0.8 mn sq m (8.7 mn sq ft) of new office space entered the market in 2020, which is much higher than the decadal average of 0.4 mn sq m (4.6 mn sq ft) for a year.

Samson Arthur, Branch Director-Hyderabad, Knight Frank India said, “Hyderabad office market saw a significant revival in Q4 2020. Despite the impact of the pandemic, rentals remained resilient and office demand is now seeing a recalibration of size and design. With news of vaccines coming in, global companies have commenced execution of their lease plans. Managed-office operators are bridging the gap between developers and occupiers by offering bundled services which are likely to stimulate the office story further.”

“The office segment got a booster with Goldman Sachs announcing its Hyderabad entry during Covid. With the presence of Amazon’s Data Centre, inquiries in this segment have increased. Going forward, new sectors such as the automotive and the electric vehicles segments show great promise,” he said.

Published on January 06, 2021

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