Demand for office space leasing falls 73% in first six months amid cramped supply

New Delhi: Fresh supply of office space in Delhi-NCR plunged 93 per cent during January-June at 3 lakh sq ft as construction activities were impacted because of lockdown to control COVID-19 pandemic, according to property consultant Savills India.

The supply stood at 43 lakh sq ft in the same period last year.

Office space leasing, too, fell by 73 per cent to 18 lakh sq ft in the first six months of this calendar year from 67 lakh sq ft in the corresponding period of the previous year.

"On the supply front, in H1 2020, only 0.3 million sq ft (3 lakh sq ft)  of additional supply came up in Delhi-NCR. Compared to H1 2019, this is a massive drop in addition of incremental stock," the consultant said.

Savills India attributed the reason for huge decline in supply to delays in building completion on account of closure of construction sites and lack of adequate labour even after easing of lockdown restrictions.

The minimal supply addition was spread across micro markets like Golf course road extension, NH8 in Gurugram and Noida expressway.

At the end of H1 2020, the total office stock stood at around 1,180 lakh sq ft for Delhi NCR.

In terms of leasing activity, 2019 was exemplary for Delhi-NCR; absorption stood at 109 lakh sq ft.

"Strong traction in demand was expected to continue in 2020 as well. But the pandemic and consequential lockdowns acted as dampeners to the strong momentum in the first half of 2020.

"Delays in decision making process on the part of occupiers, have culminated into lesser absorption for the entire capital city and adjoining areas," the report said.

Vacancy levels rose to 20 per cent during the first half of 2020.

Despite the pandemic, resultant low leasing activity and termination of few rental agreements, rentals have remained stable compared to H1 2019.

However, rentals are expected to be under pressure in the short to medium term and might witness corrections and realignments.

In terms of sectoral split, technology sector emerged as the biggest contributor with a share of 42 per cent in the overall leasing volume of H1 2020.

The technology sector was followed by financial services at a 32 per cent market share. The overall demand from co-working sector curtailed by almost 50 per cent with flexispaces having a mere six per cent share.