The IT sector continued to rule the Indian office space absorption in 2020 with the service centric cities — Bengaluru, Hyderabad and Chennai — alone accounting for almost 60% of the total 27.4 million sq ft (MSF) of space leased by corporates.
Property consulting firm Savills India said office space absorption across India’s top six cities fell 51% Y-o-Y in 2020 from a record high of 55.7 MSF a year-ago. For comparison sake, in 2018 calendar year, corporates leased 47.3 MSF of space.
Bengaluru reported the maximum office space absorption with 6.8 MSF in 2020. Despite a drop of 56% Y-o-Y, the city led overall leasing across the top six cities, followed closely by Hyderabad, which leased 5.4 MSF of space, Savills India said.
Hyderabad took over the national capital region (NCR), which settled at the third place. Delhi NCR reported around 4.4 MSF of office space absorption in 2020. Like in the previous year, the top three cities of Bengaluru, Hyderabad and NCR constitute around 61% of the total leasing activity in 2020.
The country’s financial capital, Mumbai recorded around 2.9 MSF leasing in 2020 — the least absorption witnessed among the six cities, while Chennai witnessed an annual decline of just below 29%.
Sector-wise, IT remained the top office space occupier accounting for 51.7% of total leasing in 2020 compared to 46.3% in 2019. Banking, financial services and insurance (BFSI) sector’s share in 2020 was higher at 14.3% compared to 10.6% last year.
However, it was the sectors of engineering and manufacturing, as well as transport and logistics, which doubled their respective shares in 2020 compared to 2019. They accounted for 7.8% and 3% share in 2020, respectively. On the other hand, co-working segment’s share declined to 8.5% in 2020 from 14% in 2019 as a result of occupiers widely adopting work from home (WFH) policy.
The year 2020 witnessed a 35% Y-o-Y decline in new completions, with Delhi NCR, Pune and Mumbai seeing a drop of 60%. Bengaluru and Hyderabad saw relatively lesser decline of 14% and 21%, respectively. Interestingly, Chennai maintained a similar level of completions at about 3.6 MSF in 2020.
Bengaluru, Hyderabad and NCR together comprised 80% of new completions as most supply that had come was committed in previous years. Overall vacancy levels rose marginally to 11.7% in 2020 – on a pan-India average – as new supply exceeded the pace of leasing.
Going ahead, Savills India CEO Anurag Mathur said, “The fundamentals of Indian economy remain intact and we continue to witness strong leasing traction in sectors like warehousing and industrial. Now with a vaccine in sight and businesses poised to gain momentum, we can expect to reach pre Covid-19 levels soon.”