COVID-19 is already showing its impact on office leasing. According to the latest Knight Frank Asia Pacific market bulletin, office leasing activity across India’s three tier-one cities witnessed a drop due to the impact of the pandemic.
The lockdown has led to postponement of decisions from corporates across the spectrum due to a complete standstill of activities. The supply of new office too will be limited and delayed further, hampering leasing activities. However, given that current vacancy in the market is between five to seven per cent, rents are expected to remain stable.
The Knight Frank report says that as India relaxes its lockdown in the coming days with norms of social distancing, vacancy levels may not go up as the existing companies will have to maintain their current portfolio to incorporate new public distancing norms.
Given the present situation, the lockdown in India coupled with the challenges of a global recession is likely to dent prospects for the Mumbai Metropolitan Region (MMR) office market.
In 2019, Bengaluru’s office market witnessed its highest gross take-up in a decade and the strong leasing momentum continued into Q1 20. However, since the COVID-19 outbreak, corporate occupiers have been postponing leasing deals which will impact the leasing momentum; challenges remain in short to mid-term. But the weaker currency, market undersupply and need for captive spaces will help revive take-up in the next four to six months.
In 2019, office rents in the National Capital Region of Delhi rose by four per cent, driven by growth in co-working sector. Despite the record leasing activity last year, Knight Frank expects demand for grade A office space to soften.
On the supply side, the lockdown has halted construction activities which will delay new supply. However, key micro markets within Gurugram and Noida will be less impacted by the new supply and will continue to command premium.