Real Estate

Office space absorption up 64 per cent in Q3 vs Q2 2020

Our Bureau Mumbai | Updated on October 27, 2020 Published on October 27, 2020

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

India’s office market witnessed a net absorption of 5.4 million sq ft in the quarter ended September 2020 (Q3), a 64 per cent rise, versus that in the quarter ended June 2020 (Q2). This is an encouraging trend, especially after net absorption dipped almost at a similar rate in the second quarter, according to a report by JLL Research.

The rebound was led by Bengaluru and Hyderabad, which together accounted for nearly 80 per cent of the net absorption in Q3. The heightened activity in Bengaluru indicates a gradual resurgence in take-up of spaces, coupled with the translation of pent up demand from Q2 this year.

Gross leasing in the Hyderabad office market in Q3 was at a healthy 1.9 million sq ft. At the same time, net absorption grew by 31 per cent from the previous quarter to 1.5 million sq ft in Q3, it added.

 

The city saw new completions of 3.3 million sq. ft. during the quarter, with Gachibowli and HITEC City submarkets being the highest contributors to the new supply. Nearly 81 per cent of the new completions were already pre-committed, the report said.

Rentals have largely remained range-bound across most of the sub-markets in the city during the quarter.

“The growth was mainly driven by pre-commitments in newly commissioned buildings during the quarter. As a fallout of the pandemic struck economy, occupiers are reassessing their real estate portfolios in a bid to reduce costs and review long-term expansions. Thus, significant churn was also witnessed during the quarter,” said Sandip Patnaik, Managing Director (Hyderabad), JLL India.

Occupancies in the city have been impacted, thus, resulting in a rise in vacancy to 11.3 per cent at the end of Q3 from 9.2 per cent at the end of the previous quarter. The sub-markets of CBD, HITEC City and Gachibowli saw increased vacancies due to exits by local business and small IT companies, he added.

New completions

New completions during Q3 rose by 59 per cent quarter-on-quarter with 9.2 million sq ft of new stock coming into the market.

“With lockdown restrictions being relaxed in the third quarter in most of the markets under review, office projects in the final stages of construction or pending receipt of occupancy certificates came on-board. This resulted in an increase in the supply of office space, even surpassing 8.6 million sq ft witnessed in Q1 2020,” said Samantak Das, Chief Economist and Head of Research & REIS, India, JLL.

In sync with net absorption, Bengaluru and Hyderabad led the increase in new completions, accounting for 87 per cent of the total new completions in Q3. Notably, new completions in both these markets even went past the average new completion levels witnessed in the four quarters of 2019.

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

Published on October 27, 2020
This article is closed for comments.
Please Email the Editor