BackDelhi-NCR, Mumbai lead office space absorption in September quarter: JLL
The demand for office spaces will continue to expand backed by consolidation and expansion of office spaces by occupiers and increasing demand for satellite offices, JLL said
PremiumBENGALURU : Office space absorption in major cities stood at 5.85 million sq. ft in the July-September period, up 48% quarter-on-quarter and 8% year-on-year, according to property advisory JLL India’s Office Market Update-Q3, 2021.
Mass vaccination drive and unlocking of the economy aided the revival of the office market, as confidence among occupiers grew.
“The office market has been progressive in Q3 2021 and this momentum is expected to continue in the coming quarters as the demand for office spaces will continue to expand backed by consolidation and expansion of office spaces by occupiers and increasing demand for satellite offices," said Radha Dhir, CEO and country head, India, JLL.
While net absorption in the top seven markets was at around 5.8 million sq ft in Q3 2021, the gross leasing volume touched 6.3 million sq ft during the quarter, an increase of 25% sequentially which indicates a sustained resurgence in demand.
“The larger markets of Delhi-NCR, Mumbai and Pune contributed to 62% of the total volumes recorded in the quarter. Among the top 7 cities under review, Pune witnessed heightened leasing activity compared to the previous quarter followed by Chennai," Dhir added.
Bengaluru saw net absorption of 1.01 million sq ft in the June-September period, a 47% drop from 1.89 million sq ft in the previous quarter.
Although the leasing activity gained momentum in the September quarter, it is yet to reach the pre-pandemic levels, measured in terms of quarterly average seen in 2019 and Q1 2020.
“Taking cues from 2020, the last quarter of the year is expected to witness increased momentum in the office space. However, net office absorption across seven major cities in 2021 is unlikely to touch net absorption recorded in the previous year (25.6 million sq ft) with about 15 million sq ft being recorded in the first three quarters of 2021. IT/ITeS occupiers continue to drive leasing and form a majority proportion of demand. With the unlocking of economy, several IT firms are keen to bringing back their employees to the workplace," said Dr. Samantak Das, chief economist and head research and REIS, India, JLL.
Around 35 million sq ft of Grade A office space was completed between January and September in 2021, a 53% increase compared to the same period last year. The pace of new completions shows that developers are confident of a strong revival in office leasing activity once business as usual is reinstated.
New completions in Q3 2021 were recorded at 10.89 million sq. ft., a drop of 7% when compared to Q2 2021 and a 19% increase year-on-year.
With the addition of nearly 11 million sq ft of space, the Grade A office stock in the top seven cities under consideration crossed 660 million sq ft. Almost 35% of new completion was pre-committed.
The new completion level in Q3 2021 is indicative of the fact that construction activity was not hugely impacted by the second wave. Developers, however, continued to focus on leasing of existing projects. The markets of Bengaluru, Delhi-NCR and Hyderabad accounted for about 73% of the total completion in the quarter. Almost 45% of the new supply in these cities was pre-committed.
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