Delhi-NCR witnessed an increase of 5 percent in net absorption of office space during the first quarter of 2021 on a quarter-on-quarter basis with 1.07 million sq. ft, according to a JLL report.
As per the JLL Office Market Update - Q1 2021, Noida contributed 55 percent of the net absorption, backed by strong pre-commitment in the new completions followed by Gurugram with a contribution of 38 percent.
Select big-ticket transactions in Gurugram and Noida contributed substantially to the leasing activity. There were few relocations by occupiers in a bid to reduce real estate costs and obtain fresh office spaces on attractive lease terms.
IT and IT-enabled services, BFSI, healthcare, legal, and consulting firms dominated leasing during the quarter.
"Delhi NCR continues to be a vibrant location for the office market with well-established submarkets and corridors. While Gurgaon and Noida have taken the lead in terms of development and infrastructure, the city itself continues to remain a highly preferred location. In total, eight projects totaling 4 million square feet were added to the stock which stood at 129 million square feet at the end of the quarter," Manish Aggarwal, MD, Delhi NCR, JLL India.
"NCR office market remains one of the healthy commercial office space take-up and strong demand from IT/ITES, BFSI and law firms has fueled the growth momentum thereby showing strong commercial growth in the capital city," he added.
The vacancy rate stood at 29.3 percent at the end of the quarter, increasing by 140 bps over the previous quarter. Vacancy levels rose in select prominent prime business districts where occupiers either downsized current occupancies or shifted to locations with relatively lower rents. Rents remained stable with developers offering increased rent-free periods on a case-by-case basis.
It is expected that rents will continue to remain range-bound in the short term as leasing momentum in the next few quarters will mainly hinge on the containment of the second wave of Covid.
The overall office market in India witnessed a decline of 33 percent in net absorption during Q1 2021 on a Q-o-Q basis, with 5.53 million square feet leased from January to March 2021.
On a year-on-year (Y-o-Y) basis, net absorption in Q1 2021 stands at 64 percent of the levels witnessed in Q1 2020. Bengaluru, Hyderabad and Delhi NCR accounted for nearly 80 percent of the net absorption during the quarter.
Moreover, Bengaluru and Delhi-NCR were the two markets that witnessed an increase in net absorption when compared to Q4 2020.
"While 2020 ended on a relatively high note, there was still uncertainty in the market with respect to resumption of business as usual. Occupiers continued to adopt a cautious approach and focused on reassessing their real estate portfolios and long-term commitments," said Samantak Das, Chief Economist and Head of Research & REIS, India, JLL.
"To add to the woes, increasing fears of a spike in Covid cases in the second half of March further pushed the occupiers to press pause again and postpone their real estate decisions," he said.
Das said that while net absorption is likely to hover around 25-30 million square feet, it will be at par with the net absorption levels witnessed during 2020.