Leasing of office spaces witnessed a sharp uptick in the July-September period at 12.5 million square feet across top eight cities on better demand, especially from the IT sector, with economy coming back to normalcy and corporate workforces slowly returning to work from office, according to Knight Frank India.
The gross absorption of office space stood at 4.7 million square feet in the corresponding period of the previous year and 3.6 million square feet in the previous quarter, according to Knight Frank’s India Real Estate Update – Q3 2021 that was released on Monday through a video conference. The consultant noted that the total office transactions of the eight India markets in Q3 2021 have improved and reached 83 per cent of the 2019 quarterly average level.
“The third quarter of 2021 saw the Indian office space market chart a robust recovery after the second wave of the COVID pandemic threatened to derail the market in the preceding quarter. “The volumes achieved in this quarter are also statistically significant when benchmarked against the quarterly average of 2019, as office transactions were at a historic high in that year,” said Shishir Baijal, Chairman and Managing Director, Knight Frank India.
According to the data, office space leasing in Mumbai rose to 1.2 million square feet during July-September 2021 from 1 million square feet in the year-ago period. In the Delhi-NCR office market, leasing transactions rose to 2 million square feet from 0.9 million square feet during the period under review. Office space leasing in Bengaluru jumped to 4.3 million square feet from 1.1 million square feet, while Pune saw demand rising to 1 million square feet from 0.2 million square feet.
Ahmedabad saw a rise in leasing of office space to 0.3 million sq ft from 0.1 million square feet. The absorption of office space in Chennai went up to 1.6 million square feet from 0.7 million square feet, while the demand in Hyderabad surged to 2.1 million square feet from 0.5 million square feet. However, the leasing of office space in Kolkata fell to 0.1 million square feet during July-September 2021, from 0.2 million square feet in the corresponding period of the previous year.
“The office market has shown a smart bounce back in the third quarter. Going forward, with the economy moving towards normalcy and corporates making plans to get back to Work from Office, the outlook for the segment is likely to improve further,” said Rajani Sinha, Chief Economist and National Director-Research, Knight Frank India. Healthy performance of the IT sector in the last few quarters and strong hiring in the tech sector also bodes well for the office segment, she observed.
As per the report, the information technology sector was the largest consumer of space during the quarter and took up 34 per cent of the space transacted. Occupiers also took up nearly 23,500 coworking seats across the eight markets during the third quarter of this calendar year, the highest this year. Knight Frank said that office rentals remained stagnant during the July-September period.
“In terms of rental values, NCR was the only market that experienced growth in Q3 2021 (YoY). The landlords’ strategy of alluding to relaxed lease terms is reflected in the fall in rentals on YoY basis across most markets. However, the fall in rentals has reduced in the last few months,” the consultant said. Knight Frank India is headquartered in Mumbai and has more than 1,400 experts across Bangalore, Delhi, Pune, Hyderabad, Chennai, Kolkata and Ahmedabad.