The effects of the coronavirus pandemic are now clearly visible in the commercial real estate sector as corporates and co-working players continue to defer their expansion plans. As per the recently released Cushman and Wakefield report, there has been a sharp dip of 73.4 percent in net leasing of office space in the April-June period across eight major cities.
As the fresh transaction activities came to a halt, the net absorption in Q2 2020 stands was recorded at 3.72 msf, which is lower by 49.5% on a quarterly basis and 73.4% lower on a yearly basis as fresh transaction activity was muted during the quarter, states the report titled India Office Report for Q2 (April – June 2020).
Some of the top cities are also witnessing negative absorption which has further pushed the overall net absorption downwards. While Delhi NCR and Bengaluru saw negative absorption, it is Hyderabad, Mumbai and Chennai that have contributed significantly towards net absorption with a share of 47.3 percent, 44.3 percent and 14.1 percent, respectively.
The net absorption happened primarily due to significant pre-commitments that became operational during the quarter which somewhat resulted in improved overall net absorption. Overall, net absorption of office space stood at 37.15 lakh square feet during April-June 2020 as against 139.85 lakh sq ft in the year-ago period. Bengaluru, Hyderabad and Chennai were the most active markets with 30.1 percent, 22.2 percent and 17.7 percent shares in gross leasing volumes, respectively.
The supply side has also been affected badly due the COVID-19 pandemic. About 7.54 mnsf of supply was added in Q2 2020, which was lower by 23.8 percent on a QoQ basis, 49.9 percent down by YoY basis and 43.8 percent on a half-yearly basis.
Hyderabad saw the major supply with a 40.5 percent share followed by Mumbai, Delhi NCR and Pune with 21.6 percent and 12.0 percent share respectively.
“In an ever-evolving situation, it may be difficult to predict the timeline within which commercial real estate in India might be able to restore its pre-COVID growth momentum. But, a certain level of normalcy could be expected in H2 as companies gradually resume their operations,” Money Control quoted Anshul Jain, Managing Director – South East Asia and India, as saying.