Landlords will have to be more receptive to tenant demand
The pace of recovery in the Indian office space market is expected to increase in the upcoming quarters, following on to Q4 2020 recovery sustained in both net absorptions as well as new completion, according to global property consultants JLL.
“However, some changes are bound to happen. Flexibility will be the key to speeding up the recovery process,” it added with a cautious note on 29 Dec 2020.
Landlords will have to be more receptive to the demands of tenants and offer flexible options, in terms of space as well as value.
Learnings from the pandemic will also be incorporated in office design along with an increased focus on sustainability and employee wellness. Resultantly, tenant expectations for quality spaces are expected to increase which will lead to a trajectory of graded office space developments, said JLL.
Strong market fundamentals, sustained IT sector growth, increasing demand from sectors such as e-commerce, healthcare, FMCG and the increasing presence of institutional investors will continue to drive the office market in the times to come and office, in its new avatar, will only emerge stronger in the next normal, believes JLL.
Meanwhile, office rents remained stable across the major office markets in India in 2020. With stable rental values, range-bound vacancy levels and limited upcoming Grade A supply across key markets, the office market in India continues to be landlord favorable, JLL pointed out.
Hence, reduction of headline rents is not a popular phenomenon and rents are expected to remain stable in the short- to medium-term.
“However, landlords are considering the current situation and have become more accommodating to the demands of occupiers,” noted JLL.
Landlords across markets have become more flexible in providing increased rent-free periods, reduced rental escalation and fully furnished deals to occupiers which reduces their net effective rental outgo.
The country’s office market continued to recover witnessing a net absorption of 8.27 million sq ft, an increase of 52% in Q4 2020 (Oct-Nov-Dec) when compared to Q3 2020.
Except for Bengaluru, net absorption of office spaces improved in the other six cities (Chennai, Delhi NCR, Hyderabad, Kolkata, Mumbai, Pune), according to JLL Research.
Hyderabad led the pack with the highest net absorption in Q4 2020. While the southern markets of Bengaluru and Hyderabad accounted for more than 50% of the net absorption in Q4 2020, the maximum increase in net absorption (when compared to Q3 2020) was witnessed in Mumbai, Delhi NCR and Chennai. Kolkata also witnessed a strong resurgence albeit on a lower base.
The increase in net absorption was driven by pre-commitments in new completions during the quarter. 56% of new completions were already pre-committed.
Moreover, office occupiers usually take a longer-term view while making leasing decisions and many occupiers are utilising the current situation to get attractive deals from landlords.
While IT/ITeS continues to form a majority proportion, leasing activity is being driven by increased demand for office spaces from sectors such as e-commerce, healthcare and FMCG, said JLL in its latest report on the office market. #investment #rental #market #projects /fiinews.com
