Net office space leasing fell 44 per cent year-on-year during 2020 to 25.82 million sq ft across seven major cities as corporates deferred their expansion plans and adopted 'work from home' policy for employees because of the COVID-19 pandemic, according to a report by JLL India. Net leasing of office space stood at 46.5 million sq ft in 2019 across seven cities — Delhi-NCR, Mumbai, Chennai, Kolkata, Hyderabad, Pune and Bengaluru.
The consultant, however, noted that office space demand rose 52 per cent during October-December period of 2020 to 8.27 million sq ft from 5.43 million sq ft in the previous quarter. During January-March, net absorption of office space stood at 8.8 million sq ft, which plunged to 3.32 million sq ft during the second quarter of this calendar year on account of the nationwide lockdown to curb coronavirus pandemic.
"The year 2019 saw historic highs with net absorption crossing 46 million sq ft. In 2020, net absorption dipped by 44 per cent when compared to 2019. "However, a comparison to the average annual net absorption levels between 2016 and 2018 elucidates a more realistic and thus resilient nature of the Indian office market," said Ramesh Nair, CEO and Country Head, JLL India.
Led by the southern markets of Hyderabad, Chennai and Bengaluru, net absorption levels in 2020 reached 81 per cent of what was observed between 2016 and 2018, he added. "The office real estate market was most impacted as lockdown measures disrupted the way we work. Corporates had to adopt work from home as an alternative, which brought in its wake, a new set of possibilities and challenges," JLL said.
"Perceptions around the scale and potential of remote working changed. Earlier, the view was that remote working as a concept would not work in India. This changed with the remote working experiment proving to be fairly successful for a majority of the organisations," it added. However, this does not mean that work from home presents a sustainable long-term solution for all corporates, the consultant said.
"It presents several physical and cultural challenges, more so for a country like ours with a large proportion of employees staying in multi-generational households. "Work from home could be, at best, a supplement to the traditional way of working from office and could impact the office market demand by an estimated up to 20 per cent in the medium to long-term," JLL said.
This dip will be counter-balanced by increasing demand for office spaces from emerging sectors like healthcare, e-commerce and data centres, the consultant said, adding that de-densification and splitting of offices would drive demand.