Gross leasing of office space during the January-June period fell 37 per cent to 172 lakh sq ft, the lowest in the past 10 years, across eight major cities as corporates deferred their expansion plans because of the COVID-19 pandemic, according to a report by Knight Frank India.
Releasing the report, 'India Real Estate: H1 2020', through video press conference, Knight Frank India said the leasing fell 1 per cent to 146 lakh sq ft in January-March and 79 per cent in April-June to 26 lakh sq ft.
"The office segment in the top-eight cities witnessed a historic decline in terms of both transactions and new completions," the report said. The demand from the co-working segment fell almost 40 per cent.
New supply of office space fell 27 per cent to 173 lakh sq ft during the January-June period of this calendar year.
Despite the low volume of transaction and supply, the weighted average rental for the eight cities reported a growth of 4 per cent year-on-year in the first half of 2020 to Rs 83 per sq ft per month.
Knight Frank India Chairman and Managing Director Shishir Baijal said, "With the economic uncertainties creating significant headwinds, we expect the office space take-up to remain cautious."
Most occupiers would hesitate in committing to expansion in the current market scenario, and delay their leasing decisions, he said.
"For the office market, it will be a wait and watch till a more permanent solution to this pandemic is found," Baijal said.
Rajani Sinha, chief economist and national director (research), Knight Frank, said, "After recording robust growth in the past few years, office market in the second quarter of 2020 has got hit by the COVID-19 crisis."
"While the office supply fell in this period due to the prolonged lockdown, leasing activities also took a hit as corporates deferred their expansion plans. The vacancy levels have increased, making the market more tenant friendly," she said.
According to the data for the first half of 2020, the gross leasing of office space declined in Pune to 20 lakh sq ft in January-June 2020 from 38 lakh sq ft in the corresponding period of the last year.
The demand fell 45 per cent in Delhi-NCR to 21 lakh sq ft from 38 lakh sq ft.
Hyderabad witnessed 43 per cent drop in office space leasing to 22 lakh sq ft from 38 lakh sq ft, while Bengaluru saw a 42 per cent dip to 48 lakh sq ft from 83 lakh sq ft.
The gross absorption of office space in Chennai stood at 13 lakh sq ft in the first half of this calendar year, a 28 per cent fall from 19 lakh sq ft in the year-ago period.
The demand declined 17 per cent in Mumbai to 39 lakh sq ft from 46 lakh sq ft.
In both Kolkata and Ahmedabad, the leasing of office space decreased to around 5 lakh sq ft in the first six months of 2020 from 6 lakh sq ft in the corresponding period of last year.
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