Key Indian Office Markets Continue To Hold Steady

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The office leasing activity across the three Tier I cities in India has witnessed a drop due to the impact of COVID -19.

The Knight Frank Asia-Pacific April 2020 Market Bulletin: COVID-19 and its impact on real estate found that in the first two weeks of April, almost three-quarters (or 73%) of the region’s 15 major office markets recorded a decline in leasing activity. Manila, Guangzhou, Shenzhen and Hong Kong were the only four markets that registered stable leasing activity. Many international commercial occupiers were seen to postpone leasing deals, with uncertainty around global demand, supply chains and cash flow leading to a delay in decisions, according to a report launched by Knight Frank, the global real estate consultancy, today.

City Leasing Activity
Kuala Lumpur
Phnom Penh
India Tier-1 Cities
Hong Kong

Source: Knight Frank Asia Pacific Research          


PARAMETERS MUMBAI 2019                   2020F DELHI 2019                   2020F BENGALURU 2019                   2020F
Rent (INR psf pm)  127 86 80
Vacancy  19.2% 17.14% 4.8%
Market Balance  Balance Balance Balanced Balance Landlord Balance

Source: Knight Frank Research

The office leasing activity across the three Tier I cities in India has witnessed a drop due to the impact of COVID -19. The lockdown has led to the postponement of decisions from corporates across the spectrum due to a complete standstill of activities, supply of new office too will be limited and delayed further hampering leasing activities. However, given that current vacancy in the market is between 5% – 7%, rents are expected to remain stable. Also as India looks forward to relaxing the lockdown with norms of social distancing, we do not expect vacancy levels to go up as existing companies will have to maintain their current portfolio to incorporate new public distancing norms. 

Shishir Baijal, Chairman and Managing Director, Knight Frank India said, “The situation is extremely dynamic and hence it would be challenging to provide a forecast for the year. Given the present situation, the lockdown in India coupled with the challenges of a global recession is likely to dent prospects for the MMR office market. We should witness a drop in transaction activity in 2020, down from its historic highs in 2019, while also seeing supply limiting construction delays; all these will make rent growth elusive.”


In 2019, Bengaluru’s office market witnessed its highest gross take-up in a decade and the strong leasing momentum continued into Q1 2020. However, since the COVID outbreak, corporate occupiers have been postponing leasing deals which will impact the leasing momentum; challenges remain in short to mid-term. But the weaker currency, market undersupply and need for captive spaces will help revive take-up in the next 4 to 6 months. 

National Capital Region of Delhi (NCR)

In 2019, office rents in NCR rose by 4%, driven by growth in co-working sector. Despite the record leasing activity last year, Knight Frank expects demand for Grade A office space to soften given the current COVID-19 crisis. On the supply side, the lockdown has halted construction activities which will delay new supply; circ. 19 mn sq. ft in the form of IT parks and offices in different stages of construction is expected over the coming years. However, key micro markets within Gurugram and Noida will be less impacted by the new supply and will continue to command premium. 

Mumbai Metropolitan Region (MMR)

Mumbai recorded historic growth in office market transactions in 2019 and the strong leasing momentum was maintained till Q1 2020. However, given the severity of current pandemic in the MMR region and possible extension of lockdown in the city, demand for office market continues to remain impacted.

A sentiment survey conducted with Knight Frank brokers saw 11 out of 15 markets reporting slower leasing activity within their markets since April 1stTim Armstrong, Head of Occupier Services and Commercial Agency for Knight Frank, Asia Pacific said, “The need to preserve cash and reduce capital expenditure is inevitably putting a hold on corporate real estate decisions such as strategic relocations or fit-out projects which require significant capital outlay.”

“However, we expect occupiers to pause rather than cancel such activities. Already, we are witnessing steady demand from food retailing, telecommunications, online education, and some manufacturing firms in some markets. The markets seeing an uptick in activity over the last two weeks are mainland China – which is firmly in recovery – and South Korea,” Armstrong added.

The report states that the e-commerce logistics sector continues to be active in Southern China, while Taipei still sees market balances in favour of landlords. Taiwan office demand continues to outstrip supply, and a flight to quality trend indicates rents can be expected to continue growing.

Although companies have been forced to participate in the world’s largest work-from-home experiment, the demise of the office is an unlikely outcome. 

Armstrong said, “A physical office – one that is separate from our homes – creates a much-needed barrier between work and home life. The current crisis won’t eliminate the need for office space but will help us appreciate its social value.”

“In fact, the current situation has expedited a trend we have identified in the last few years, namely, the move towards offices as social hubs of creativity and innovation rather than centres for administration.” he added.

A Roadmap to Re-occupancy

To help businesses prepare for a return to work, Knight Frank has launched a roadmap to ensure that employees are able to safely re-enter the workplace once lockdown sanctions have lifted, whilst ensuring the wellness of employees and decreasing the spread of COVID-19. 

The roadmap is designed to support occupiers in five clear areas: understanding their employee base, reviewing the employee/ customer journey within the workplace, evaluating social distancing options, determining occupancy impact and developing protocols.

The roadmap, which helps businesses determine best practice for re-occupying offices, identifies two categories of change that will need to occur in order to safely re-enter the workplace. The first is behavioural changes, ensuring that strict protocols such as clear desk policies are applied, and that social distancing is possible within the workplace. The second is environmental changes including increased air flow, changing HVAC filters or enhancing cleaning regimes. 

Neil McLocklin, Head of Strategic Consultancy at Knight Frank said: “Businesses will be keen to return to the office as soon as possible, but their staff will need assurance that it is a safe environment to do so. This will mean we come back to a very different office, with perhaps every other desk vacant to allow social distancing, and very different behaviours. Defining and agreeing the new policies, protocols and cleaning regimes is critical now, so businesses are prepared for the return and staffs are reassured that the workplace will be safe.

“We will need to adapt to a new normal, at least for the foreseeable future, which combines both the importance of collaboration, social interactions and conducting business whilst mitigating fear and protecting the workforce,” McLocklin added.

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