Office transactions across prime Indian cities up by 168% YoY; new office completions grow by 67% YoY in Q3 2021: Knight Frank India

Office transactions across prime Indian cities up by 168% YoY; new office completions grow by 67% YoY in Q3 2021: Knight Frank India

India’s office transactions recorded a strong quarterly growth in Q3 of 2021, despite a much more severe second wave of COVID infections and the looming threat of a third wave. The total office space absorbed across major cities was at 1.2 mn sq m (12.5 million sq. ft) in the third quarter, representing 168% year-on-year growth, according to Knight Frank’s Office Market Update-Q3, 2021. Knight Frank India, leading international property consultancy, today launched its quarterly report – India Real Estate Update – Q3 2021.

The report mentioned that, in 2021 (January –September 2021) office markets witnessed an incremental activity of 13% in transactional volume and 6% growth in new office completions compared to corresponding period of the last year.

With corporate India taking significant steps toward resuming work from office, increasing rate of vaccinations along with fewer restrictions on mobility, improved the business environment and aided a recovery to market traction levels seen in pre-pandemic times. Knight Frank India noted the total office transactions of the eight India markets in Q3 2021 have improved and reached 83% of the 2019 quarterly average level.

Among the larger markets, Chennai, Bengaluru, and National Capital Region (NCR) recorded highest recovery in Q3 2021 with transactions reaching the level of 123%, 112% and 93% respectively of the quarterly average of the year 2019.

The Information Technology sector was the largest consumer of space during the quarter and took up 34% of the space transacted. The heightened transaction activity from this sector is an extremely encouraging driver for office demand as it is the most prolific occupier category in the office market.Occupiers also took up nearly 23,500 co-working seats across the eight markets during the quarter, the highest this year.

“The third quarter of 2021 saw the Indian office space marketchart a robust recovery after the second wave threatened to derail the market in the preceding quarter. The volumes achieved in this quarter are also statistically significant when benchmarked against quarterly average of 2019, as office transactions were at a historic high in that year. In near future, capex announcements from leading Indian companies during the recent quarterly earnings will prove be a significant growth factor for the demand of the office assets.” said Shishir Baijal, Chairman and Managing Director, Knight Frank India.

Transaction volumes have been inversely correlated with the perceived intensity of the pandemic. Market activity peaked in Q4 2020, as new COVID-19 cases trended lower and the near-term visibility of a viable vaccine increased. Similarly, the second wave of infections impacted transacted volumes during Q2 2021 and the current recovery reflects the comparatively easing of the impact of the pandemic.

New completions also picked up significantly with 1.1 mn sqm (11.9 mn sq ft) getting delivered in Q3 2021, a 67% growth YoY. Bengaluru, Pune and Hyderabad accounted for 73% of the new completions with Bengaluru seeing the most space delivered at 0.4 mn sq m (4 mn sq ft). For Jan-Sep 2021, new completions have grown by 6% compared to corresponding period of previous year. During the second wave of COVID-19, new completions took a hit due to the unavailability of labour.

According to the report the fourth quarter of 2021 could see heightened traction as seen in 2020, if infection levels continue to remain low and vaccination targets are achieved.

“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 Offfice, the outlook for the segment is likely to improve further. 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, ”Rajani Sinha, chief economist And national director- research, Knight Frank India said.

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.

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