Net leasing of office space down 26% in 7 cities in April-June

Net leasing of office space fell 26 per cent during April-June across seven major cities to 8.5 million square feet as compared to the previous quarter due to lower supply, according to real estate consultant JLL India.

In January-March this year, the net absorption stood at 11.55 million square feet. However, net absorption jumped nearly threefold from 2.98 million square feet in the April-June period of last year on a lower base effect.

Office demand plunged in the April-June quarter of 2021 because of the second wave of the Covid-19 pandemic. Net absorption is calculated as the new floor space occupied less floor space vacated. Floor space that is pre-committed is not considered to be absorbed until it is physically occupied.

"The lower quarterly completions (of office space) were a likely cause for the quarterly decrease in net absorption," JLL pointed out.

On a half-yearly comparison, absorption in the first six months of 2022 is higher than the corresponding period of both 2020 and 2021 and is 87 per cent of the H1 2019 number. This indicates that growth and expansion plans for occupiers were back to a significant extent during the last few quarters.

According to the JLL data, the net office space leasing in Bengaluru rose to 4.12 million square feet in April-June 2022 from 1.67 million square feet in the previous quarter.

The leasing stood at 1.78 million square feet in the April-June period last year. In Chennai, the net leasing fell to 0.53 million square feet in April-June from 1.21 million square feet in the January-March quarter. The absorption stood at 0.11 million square feet in the year-ago period.

Net leasing of office space in Delhi NCR fell marginally to 1.32 million square feet in April-June from 1.34 million square feet in the previous quarter. The number stood at 0.61 million square feet in the year-ago period.

In Hyderabad, the net leasing fell to 0.75 million square feet in April-June from 3.42 million square feet in the previous quarter. The absorption stood at negative 0.86 million square feet in the corresponding period of the previous year.

Net leasing in Kolkata rose to 0.19 million square feet in April-June from 0.18 million square feet in the year-ago period. The number was 0.02 million square feet in April-June last year.

Mumbai saw a decline of 8 per cent in net leasing to 1.33 million square feet during April-June 2022 from 1.44 million square feet in the previous quarter. The absorption stood at 0.61 million square feet in the year-ago period.

The net leasing of Pune plunged to 0.27 million square feet in April-June from 2.30 million square feet in the previous quarter. Absorption stood at 0.71 million square feet in the April-June period last year.

According to JLL India, the gross leasing of office space rose 36 per cent to 14.29 million square feet in April-June from 10.48 million square feet in the previous quarter. The number stood at 5.06 million square feet in the year-ago period.

Gross leasing volume refers to all lease transactions recorded during the period, including confirmed pre-commitments, but does not include term renewals. Deals in the discussion stage are not included.

"Market activity was also characterized by more relocation and consolidation activity while expansion-driven growth was slower. This is reflected in the higher gross leasing number not translating into a similar trend in net absorption," the consultant said.