India Real Estate RESEARCH - OFFICE MARKET - JANUARY - JUNE 2021 - Knight Frank
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RESEARCH
India
Real Estate
knightfrank.co.in/research
OFFICE MARKET - JANUARY - JUNE 2021Mumbai HO Knight Frank (India) Pvt. Ltd. Paville House, Near Twin Towers, Off. Veer Savarkar Marg, Prabhadevi, Mumbai 400 025, India Tel: 022 6745 0101 / 4928 0101; Bengaluru Knight Frank (India) Pvt. Ltd. 204 & 205, 2nd Floor, Embassy Square, #148 Infantry Road, Bengaluru 560001, India Tel: 080 40732600 / 22385515 Pune Knight Frank (India) Pvt. Ltd. Unit No.701, Level 7, Pentagon Towers P4, Magarpatta City, Hadapsar, Pune 411 013, India Tel: 020 67491500 / 30188500; Chennai Knight Frank (India) Pvt. Ltd. 1st Floor, Centre block, Sunny Side, 8/17, Shafee Mohammed Road, Nungambakkam, Chennai 600 006, India Tel: 044 4296 9000 Gurgaon Knight Frank (India) Pvt. Ltd. Office Address: 1505-1508, 15th Floor, Tower B, Signature Towers South City 1, Gurgaon 122 001, India Tel: 0124 4782700; Hyderabad Knight Frank (India) Pvt. Ltd. Western Dallas Centre, 5th floor, Office #3, Hyderabad Knowledge City, Survey No. 83/1, Raidurg, Serilingampally Mandal, Ranga Reddy District, Telangana Hyderabad - 500032 Tel: 040 44554141; Kolkata Knight Frank (India) Pvt. Ltd. PS Srijan Corporate Park Unit Number – 1202A, 12th Floor, Block – EP & GP, Plot Number - GP 2, Sector – V, Salt Lake, Kolkata 700 091, India Tel: 033 66521000 Ahmedabad Knight Frank (India) Pvt. Ltd. Unit Nos. 407 & 408, Block ‘C’, The First, B/H Keshav Baugh Party Plot, Vastrapur, Ahmedabad – 380015 Tel: 079 48940259/ 40380259 www.knightfrank.co.in/research
CONTENTS
ALL INDIA AHMEDABAD BENGALURU
PA G E N O. . . . . . . . . . . . . . . . . . . . . . . . . . 08 PA G E N O. . . . . . . . . . . . . . . . . . . . . . . . . . 13 PA G E N O. . . . . . . . . . . . . . . . . . . . . . . . . . 18
CHENNAI HYDERABAD K O L K ATA
PA G E N O. . . . . . . . . . . . . . . . . . . . . . . . . . 23 PA G E N O. . . . . . . . . . . . . . . . . . . . . . . . . . 2 8 PA G E N O. . . . . . . . . . . . . . . . . . . . . . . . . . 33
MUMBAI NCR PUNE
PA G E N O. . . . . . . . . . . . . . . . . . . . . . . . . . 39 PA G E N O. . . . . . . . . . . . . . . . . . . . . . . . . . 45 PA G E N O. . . . . . . . . . . . . . . . . . . . . . . . . . 514 I N D I A R E A L E S TAT E
5 I N D I A R E A L E S TAT E
FOREWORD
S H I S H I R B A I JA L
C H A I R M A N A N D M A N AG I N G D I R E CTO R
K N I G H T F R A N K ( I N D I A ) P V T. LT D.
The intensity of COVID-19 infections has been the primary bellwether for
the economy and the real estate markets across India since the beginning
of 2020. There was a standstill in activities when the pandemic and
consequent nationwide lockdown first hit the nation. However, post the
first wave and with easing of the stringent lockdown, we saw that the real
estate sector made a strong comeback.
The pandemic second wave this year was more severe than the first one.
Unfortunately, we lost many human lives. However, with better awareness
and understanding of the virus, mass vaccination drives and preparedness
to work with restricted mobility, businesses and households alike saw a
relatively better economic momentum this time. Seen in this light, the
severe second wave, at worst, served as a temporary blip.
On the commercial real estate front, office sector recorded a better
performance during the second wave impacted Q2 2021 compared
to the first wave seen in Q2 2020. Transactions across the markets
under coverage grew by 39% YoY in the latest quarter despite severely
restrictions on workforce mobility. Cumulatively, in H1 2021, transactions
were down by 29% YoY when compared to pre pandemic levels. Going
forward, with rapid vaccination progress and economic aspirations
to return to normality, we are likely to see improved activity levels
once important vaccination milestones are achieved. The Information
Technology sector continued to hire employees amid this prolonged
pandemic, and this creates a strong potential for office space once
normalcy returns.
I am glad to share the 15th edition of our flagship half-yearly report
‘India Real Estate’. The report captures key developments in the office
sector across top 8 cities in the country. I hope you find that this edition
provides an encouraging connect with the market. Wishing you and your
loved ones a safe and healthy life.6 I N D I A R E A L E S TAT E
RA JA N I S I N HA
CHIEF ECONOMIST &
N AT I O N A L D I R E C T O R
RESEARCH
PICK-UP IN CONSUMPTION:
KEY TO ECONOMIC REVIVAL
The Indian economy had started to recover from the first wave of pandemic before it got
hit by a second wave in March 2021. The lockdown imposed during the second wave was
regional in nature and less restrictive. Hence, the immediate economic impact has been
relatively less severe. However, the damage to health and life in the second wave has been
brutal, resulting in deeper scarring of consumer sentiments.7 I N D I A R E A L E S TAT E
With the second wave of infection on a downward trajectory, a sustained increase in inflation while growth remains weak will
economic activity is again gathering momentum. The ongoing make RBI’s task more challenging going forward.
immunization is also providing comfort in the current opening up
The pick-up in India’s exports, in the midst of these challenges, is
process. However, it is to be noted that so far, only around 7% of
a silver lining. Exports in April-June 2021 have recorded a healthy
India’s population has been fully vaccinated as against almost 50% of
growth of 19% even when compared to the corresponding period of
the population fully vaccinated in developed economies like US and
2019. As economic growth in developed economies gain momentum,
UK. Moreover, even though the economy has started to re-open, there
India’s exports are likely to benefit from the external demand. Strong
is concern around a third wave of infection.
FDI inflows is another positive for the economy, as reflected by FDI
The Indian economy is projected to grow by 9.5% in FY 2022 as per inflows of USD 82 billion in FY 2021. India currently has a comfortable
RBI. This high number comes on the low base of the previous year forex reserve of over USD 608 billion which reduces the vulnerability
when the economy had contracted by 7.3% due to the stringent of the Indian currency, even if developed economies like the US move
national lockdown. Even with 9.5% growth in FY 2022, the economy away from an accommodative monetary policy stance.
would only be recording a minor uptick from the FY 2020 level of
As the Indian economy is opening up in phases, there is growing hope
GDP. The risk is that if there are further waves of infection which
that economic momentum will gather pace. India’s growth trajectory
are severe, the GDP growth could be lower than this projected
will depend on the COVID situation and whether we get hit by further
number. India’s economic recovery is likely to be K shaped in nature
waves of the infection. The pace of vaccination will play a very critical
with sectors like pharmaceutical and IT/ITeS recording healthy
role to avoid severe waves of infection in future. India has seen
growth, manufacturing sectors picking up, while the touch-based
vaccination of around 4 million doses per day in June 2021 and this
Service sector will feel the pain for a longer period of time. The large
daily vaccination number needs to rise to over 10 million doses per
unorganised sector and MSME sector of India, which is impacted by
day for us to achieve full vaccination of the adult population by year
lockdowns, will have a more difficult recovery path.
end. With the Government working towards increasing vaccination
The critical aspect for India’s economic recovery will be increased supply, India’s growth story in this pandemic year will be contingent
consumption spending, as Private Final Consumption Expenditure on the speed of vaccination going forward.
contributes 56% to India’s GDP. Consumer sentiments though have
been severely impacted by the pandemic, more so by the second wave
that has been debilitating to human life. The second wave has also
had a severe impact on the rural area compared to the previous wave.
As per RBI’s Consumer Confidence survey, the current situation index
(CSI) in May 2021 dropped to a low of 48.5, lower than that seen after
the first wave of pandemic. In the current situation, what is needed is
direct demand boosting stimulus measures from the government to
7%
aid consumption revival. Any kind of tax cut even for a limited period
of time, will help provide the much-needed boost to consumption
spending as was seen with the stamp duty cut in Maharashtra. This
cut in stamp duty rates, effective from September 2020 to March
2021, not just helped boost residential sales in Maharashtra but was
of India’s population has
also effective in increasing the state government’s revenue collection been fully vaccinated
from registration.
Another aspect of concern for the Indian economy is the rising
9.5 %
trend of inflation. The CPI inflation in India breached RBI’s upper
band of 6% in May 2021 and remained steady at the same levels
in June 2021, while the WPI hit a high of 12.9% in May 2021 and
continued to remain above 12% in June 2021 as well. Commodity
prices, specifically metal and crude oil, have been rising globally as
India’s projected GDP
economies like US and China have started to pick up. While RBI has
growth for FY22
kept the monetary policy accommodative and the interest rates low,8 I N D I A R E A L E S TAT E - I N D I A
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Expert Take
The impact of second wave of the pandemic in Q2 2021 has
not been as pronounced as that of the first wave in Q2 2020.
However, the office market has been more affected by the
pandemic compared to the residential market that is seeing
a sustained resurgence in demand. The outperformance of
the IT sector and the strong hiring it witnessed during the
pandemic holds the potential for office demand once a return
OFFICE to workplace occurs as vaccination milestones are achieved.
MARKET The progress in employee vaccinations and the extent of
improvement in corporate earnings hold the key to a return to
the office and a resumption of expansion plans.
YA S H W I N B A N G E R A
INDIA MARKET SUMMARY
PARAMETER 2020 CHANGE (YOY) H1 2020 H1 2021 CHANGE (YOY)
Completions
3.30 (35.5) -42% 1.71 (18.4) 1.39 (15.0) -18%
mn sq m (mn sq ft)
Transactions mn
3.66 (39.4) -35% 1.60 (17.2) 1.14 (12.3) -29%
sq m (mn sq ft)
Stock mn sq m (mn sq ft) 73.52 (791.4) 5% 71.93 (774.2) 74.92 (806.4) 4%
Vacancy (%) 15.4% 14.2% 16.6% -
Source: Knight Frank Research10 I N D I A R E A L E S TAT E - I N D I A
INDIA OFFICE MARKET ACTIVITY
Completions (mn sq m) Transactions (mn sq m)
2.0
1.8
1.6
1.4
mn sq m
1.2
1.0
0.8
0.6
0.4
0.2
0.0
Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021
Source: Knight Frank Research
• The economic shock of the first wave of the COVID-19 pandemic the requirement of technological applications and associated
resulted in a 24.4% YoY drop in GDP in Q2 2020 due to the software and internet infrastructure which is the domain of the IT
complete stoppage of business activity during the period. The industry. On account of a robust business environment, IT sector
office market was also impacted by this event as corporate hiring remained strong even during the pandemic and this holds
occupiers restricted non-core expenses and put expansion plans the potential for office demand once a return to workplace happens
on hold. However, the market recovered well towards the end of the in full force as vaccination milestones are achieved. In the interim,
year as the intensity of the pandemic waned and clarity over the the IT sector’s share in office transactions fell to 31% in H1 2021
availability of a viable vaccine increased. Q4 2020 posted a historic compared to 43% in H1 2020.
high in quarterly transaction volumes as latent occupier demand
• Other Service Sectors such as E-commerce, Healthcare and
got converted during the period.
Education bucked the negative trend and were very active during
• The second wave of the pandemic hit the market in Q2 2021 but H1 2021. The volume transacted by them grew by a substantial 68%
despite its severity being much more than first wave, transaction YoY.
volumes in Q2 2021 have grown 39% YoY compared to Q2
• Co-working companies accounted for a modest 10% of the
2020. Five out of eight markets have shown an improvement
transactions during H1 2021 but saw substantial increases in
in transaction volumes in Q2 2021 compared to Q2 2020.
their occupancy rates during this period. They have also been
An improved understanding of the pandemic and increasing
increasingly able to negotiate favorable deals on revenue-sharing
availability of vaccines helped keep the needle moving during
terms with most, if not all of the up-front investment in fit-outs etc
the quarter. However, in terms of half-yearly numbers, transaction
being borne by the developer. Their positioning as experts in the
volumes have fallen 29% YoY to 1.14 mn sq m (12.3 mn sq ft) in H1
domain of workspace delivery continues to strengthen even as this
2021.
sector goes through a consolidation phase that will see the weaker
• The construction situation was better managed during the second players eventually getting pushed out of the market. Co-working
wave compared to the first wave of pandemic. However, the 1.39 mn sector companies accounted for a significantly high 23% and
sq m (15.1 mn sq ft) of office space that attained completion during 27% of the volumes transacted in Hyderabad and Ahmedabad
H1 2021 was 18% lower than that in H1 2020 as developers focused respectively.
on leasing existing projects. The vacancy rate has increased
• Despite the severe second wave, transaction volumes in Q2 2021
to 16.6% in H1 2021 compared to 14.2% previously. Average
have shown a strong growth over same period last year. Developers
transacted rent trended lower for seven of the eight markets during
have continued their accommodative stance by extending flexibility
H1 2021 with rents in Bengaluru, Pune and Mumbai falling by 14%,
in deal terms to keep occupiers interested in this uncertain
11% and 9% YoY respectively.
environment. The progress in employee vaccinations and the
• The Information Technology (IT) sector has not been impacted by extent of improvement in corporate earnings hold the key to a
the COVID-19 pandemic as the need for remote activity magnified return to the office and a resumption of expansion plans.11 I N D I A R E A L E S TAT E - I N D I A
INDIA OFFICE MARKET VACANCY SECTOR-WISE TRANSACTIONS SPLIT IN H1 2020
AND H1 2021
18%
16.6%
16%
16.0%
14% 16%
15.4%
15.4%
14%
14.2%
13.2%
13.1%
13.1%
14%
12.6%
12.7%
12%
H1 2020
10%
13%
8% 43%
6%
4%
2% 13%
0%
Q4 2020
Q3 2020
Q2 2020
Q4 2019
Q1 2020
Q3 2019
Q2 2019
Q2 2021
Q1 2019
Q1 2021
34%
H1 2021
Source: Knight Frank Research
31%
10%
13%
39%
SECTORS H1 2020 H1 2021
■ BFSI 16% 13%
■ Information Technology 43% 31%
■ Manufacturing 13% 13%
■ Co-working 14% 10%
■ Other Service Sectors 14% 34%
YoY growth in transactions during
Q2 2021
Note: BFSI includes BFSI support services
Source: Knight Frank Research12 I N D I A R E A L E S TAT E - I N D I A
MARKET -WISE RENTAL MOVEMENT
OFFICE TRANSACTIONS OFFICE COMPLETIONS
H1 2021 IN MN SQ M 2020 IN MN SQ M H1 2021 IN MN SQ M 2020 IN MN SQ M
(MN SQ FT) (YOY CHANGE) (MN SQ FT) (YOY CHANGE) (MN SQ FT) (YOY CHANGE) (MN SQ FT) (YOY CHANGE)
MUMBAI 0.15 (1.6) (-58%) 0.56 (6.0) (-38%) 0.12 (1.3) (-65%) 0.49 (5.3) (-2%)
NCR 0.22 (2.4) (16%) 0.43 (4.7) (-46%) 0.28 (3.0) (273%) 0.27 (2.9) (-76%)
BENGALURU 0.33 (3.6) (-25%) 1.14 (12.3) (-19%) 0.48 (5.2) (29%) 0.88 (9.4) (-41%)
PUNE 0.11 (1.2) (-43%) 0.34 (3.7) (-40%) 0.27 (2.9) (1344%) 0.07 (0.7) (-83%)
AHMEDABAD 0.04 (0.4) (-16%) 0.12 (1.3) (-15%) 0.1 (1.1) (-58%) 0.48 (5.1) (5%)
CHENNAI 0.11 (1.2) (-9%) 0.42 (4.5) (-13%) 0.08 (0.8) (-75%) 0.31 (3.3) (91%)
HYDERABAD 0.15 (1.6) (-27%) 0.55 (6.0) (-53%) 0.07 (0.8) (-80%) 0.8 (8.7) (-20%)
KOLKATA 0.02 (0.3) (-45%) 0.08 (0.9) (-32%) 0 (0) (-100%) 0.01 (0.1) (-99%)
TOTAL 1.14 (12.3) (-29%) 3.66 (39.4) (-35%) 1.39 (15.0) (-18%) 3.3 (35.5) (-42%)
Source: Knight Frank Research
MARKET -WISE RENTAL MOVEMENT
RENTAL VALUE IN H1 2021 IN INR/
MICRO-MARKET SQ M/MONTH 12-MONTH CHANGE 6-MONTH CHANGE
( INR/SQ FT/MONTH)
MUMBAI 1,173 (109) -9% -6%
NCR 872 (81) 3% -1%
BENGALURU 775 (72) -14% -10%
PUNE 710 (66) -11% -6%
AHMEDABAD 433 (40.2) -5% -2%
CHENNAI 645 (59.9) -1% 0%
HYDERABAD 664 (61.7) -1% 1%
KOLKATA 375 (34.8) -10% -3%
Source: Knight Frank Research13 I N D I A R E A L E S TAT E - A H M E D A B A D
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Expert Take
The second wave of COVID-19 infections has put corporate
expansion plans on hold. The office market rent continues
to correct, as occupier demand falters after a brief recovery
in H2 2020. The vacancy level rose to 46% as office
development continued unabated in H1 2021.
OFFICE
MARKET
YA S H W I N B A N G E R A
AHMEDABAD MARKET SUMMARY
PARAMETER 2020 CHANGE (YOY) H1 2020 H1 2021 CHANGE (YOY)
Completions
0.48 (5.1) 5% 0.24 (2.6) 0.10 (1.1) -58%
mn sq m (mn sq ft)
Transactions mn
0.12 (1.3) -15% 0.05 (0.5) 0.04 (0.4) -16%
sq m (mn sq ft)
Average transacted rent
INR/sq m/month (INR/sq 442 (41) -4% 454 (42) 433 (40) -5%
ft/month)
Stock mn sq m (mn sq ft) 2.9 (31.5) 19% 2.7 (29) 3.0 (32.6) 12%
Vacancy (%) 45.2% 45.6% 45.8% -
Source: Knight Frank Research15 I N D I A R E A L E S TAT E - A H M E D A B A D
AHMEDABAD OFFICE MARKET ACTIVITY
Completions (mn sq m) Transactions (mn sq m)
0.30
0.25
mn sq m
0.20
0.15
0.10
0.05
0.00
Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021
Source: Knight Frank Research
• The Ahmedabad office market was hit hard by the turbulence
caused by the pandemic during 2020, but the spike in transactions
AHMEDABAD OFFICE MARKET VACANCY
seen during the last quarter of the year made up for some of the
lost ground. While Ahmedabad concluded 2020 with transaction 50%
volumes down 15.1% YoY, it emerged as the least impacted among
the eight markets that cumulatively saw annual volumes fall by a 45%
46.4%
45.8%
45.2%
historic 35.1% YoY. However, persistently high supply continued to
45.0%
be the bane of the market that pushed vacancy levels to 45.2%. 40%
41.7%
39.9%
• The office market has not been able to sustain the recovery in
35%
transaction volume seen during H2 2020, as occupier activity
35.9%
35.0%
was curtailed by weaker sentiments due to the still bleak business
34.0%
30%
environment and the surging second wave of infections which hit
31.7%
hard in Q2 2021. Transacted volumes during H1 2021 were lower by
25%
15.6% YoY at 0.04 mn sq m (0.4 mn sq ft), still much better than the
29% fall seen cumulatively across the eight markets.
20%
• The already high vacancy level rose an additional 410 basis points
YoY to 45.8% in H1 2021 as office completions outstripped supply
15%
during the period, albeit to a lesser extent than at the beginning of
2018. Increasing vacancy levels and weak occupier activity pushed
10%
the average transacted rentals down by a further 4.7% YoY to INR
432/sq m/month (INR 40/sq ft/month).
5%
• Approximately 0.1 mn sq m (1.1 mn sq ft) of office space was
completed during H1 2021 and nearly all of it was located in CBD 0%
Q4 2020
Q3 2020
Q2 2020
Q4 2019
Q1 2020
Q3 2019
Q2 2019
Q2 2021
Q1 2019
Q1 2021
West locations such as Ambavadi and Bopal Ambli Road. Navratna
Corporate Park and Ashwamegh Elegance-3 were among the
largest projects that attained completion during this period. Source: Knight Frank Research16 I N D I A R E A L E S TAT E - A H M E D A B A D
BUSINESS DISTRICT CLASSIFICATION
BUSINESS DISTRICT MICRO MARKETS
CBD West Bodakdev, Keshav Baug, Prahladnagar, Satellite, SG Highway, Thaltej
PBD Gandhinagar, GIFT City
CBD Ashram Road, Ellis Bridge, Paldi
Source: Knight Frank Research
• A lease of 0.01 mn sq m (0.08 mn sq ft) inked by the pharmaceutical
BUSINESS DISTRICT WISE TRANSACTIONS major Eris Lifesciences at Shivarth Ambit, Bodakdev in CBD West
SPLIT IN H1 2020 AND H1 2021 was the largest transaction during H1 2021. Limited investment
activity was observed during the period with about 0.004 mn sq m
8%
(0.04 mn sq ft) being committed to by investors.
5%
• The CBD and PBD business districts saw little traction during H1
2021 with only 3% of the transactions during the period taking
place in each of these business districts.
• Rental levels were under pressure due to subdued activity and
H1 2020
mounting supply in H1 2021, with the CBD, CBD West and PBD
business districts each correcting by 5%, 4.5%, and 5.5% YoY
respectively.
87%
SECTOR-WISE TRANSACTIONS SPLIT IN H1
2020 AND H1 2021
3%
H1 2020 H1 2021
4%
8% BFSI 7%
Information
14% Technology 18%
7% Manufacturing 22%
H1 2021 68% Other Services 26%
93% 3% Co-working 27%
Note: BFSI includes BFSI support services
Source: Knight Frank Research
• While transaction activity has contracted significantly during the
period, it is well distributed across the five sectors unlike the share
Business district H1 2020 H1 2021 of business districts. This can be attributed to the absence of big-
■ CBD 5% 3% ticket deals in the current period, which play a big role in an office
■ CBD West 87% 93% market like Ahmedabad which has averaged only 0.05 mn sq m (0.6
■ PBD 8% 4% mn sq ft) per half-yearly period over the past six years.
Source: Knight Frank Research • The occupiers’ preference to defer longer term commitments in
favor of more flexible office space arrangements has motivated
• The CBD West business district continued to dominate occupier co-working operators to increase their stake in the Ahmedabad
interest due to the growing infrastructure and new office space market. This sector accounted for 27% of the space transacted
developments occurring here in recent times. 93% of the volume during H1 2021, the highest of all sectors and almost double the
transacted during H1 2021 occurred in CBD West locations on space ever transacted by the Co-working sector in a half-yearly
Bopal-Ambli Road, Keshavbaug and SG Highway. period.17 I N D I A R E A L E S TAT E - A H M E D A B A D
• Similar to the Co-working sector, the Information Technology (IT) • The second wave of the pandemic impacted transaction volumes
and the Manufacturing sectors have gained in transactions’ share during the first half of the year. While traction started picking
and also in terms of absolute volumes YoY. Of the two sectors, the up by the end of Q2 2021, the market still faces significant
volume transacted by the Manufacturing sector has increased to challenges, especially with the threat of a third wave weighing
a greater extent, growing by 188% YoY to 0.009 mn sq m (0.09 mn down on corporate expansion plans. While occupier activity has
sq ft) in H1 2021. Considering that this is the second consecutive been subdued, office development continues to outstrip demand
period of strong volumes by the Manufacturing sector, we believe putting pressure on rent growth. The market will be hard pressed
that this increase in traction is a positive indication for the market, to maintain equilibrium if the rate at which new office spaces have
despite being on a lower base. In addition to FMCG companies, been coming online, continues to persist.
pharmaceutical companies from the Manufacturing sector such as
Eris Lifesciences and Unison were active during the period.
• The YoY drop in volume during H1 2021 can be largely attributed
AVERAGE DEAL SIZE AND NUMBER OF DEALS
to the steep fall in the Other Services sector’s transactions which
TREND
has taken up just a third of the volume achieved during H1 2020.
However, it must be noted that H1 2020 was also an exceptional Average deal size sq m Number of deals
period for the Other Services sector as it accounted for an 3500 50
extraordinarily high 68% of the transacted volume. This was largely
due to one big-ticket lease which amounted to nearly 41% of the
total volume transacted during that period. The current 26% share 3000
of transaction volume is closer to the sector’s long-term mean 40
share of 27%. Leases were signed by law firms like Amarchand
Mangaldas, healthcare players like Shalby Hospitals in premium 2500
properties such as Parshwanath Esquare and Mondeal in the CBD
West business district. 30
Average deal size sq m
2000
• The BFSI sector’s share in transactions has marginally reduced
Number of deals
from 8% in H1 2020 to 7% in H1 2021. A bulk of these were small
leases signed in PBD micro-markets of GIFT City, Mani Nagar and 1500
Odhav by companies such as Citibank, Barclays, IDFC and ICICI 20
Lombard.
1000
• The absence of big-ticket transactions and an increase in the
overall number of deals has brought down the average deal size
10
significantly. Almost 18 deals or 53% of the 34 transactions during
500
H1 2021 were accounted for by the BFSI and Other Services
sector companies which collectively took up only 33% of the area
transacted.
0 0
H1 2018
Source: Knight H2 2018 H1 2019
Frank Research H2 2019 H1 2020 H2 2020 H1 2021
BUSINESS DISTRICT-WISE RENT MOVEMENT
Rental value range in H1 2021 in
Business district 12-month change 6-month change
INR/sq m/month (INR/sq ft/month)
CBD 488-452 (36-42) -5% -3%
CBD West 420-538 (39-50) -4.5% -2%
PBD 323-431 (30-40) -5.5% -3%
Source: Knight Frank Research18 I N D I A R E A L E S TAT E - B E N G A L U R U
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Expert Take
The prolonged COVID-19 pandemic has temporarily restricted
physical occupancy at office premises and this has weighed on
occupier sentiments for space take-up. Expectedly, this reflects
on the H1 2021 transaction numbers. The strong trend of hiring
in the Information Technology sector during the pandemic
created a latent demand, the conversion of which into space
take-up was deferred by the severe second wave. The inherent
OFFICE strength of the Bengaluru office market ecosystem, which was
MARKET visible post first wave and pre-vaccination roll-out, will be a
key determinant of market trajectory as pandemic situation
improves.
V I V E K R AT H I
BENGALURU MARKET SUMMARY
PARAMETER 2020 CHANGE (YOY) H1 2020 H1 2021 CHANGE (YOY)
Completions
0.88 (9.42) -41% 0.37 (4.0) 0.48 (5.2) 29%
mn sq m (mn sq ft)
Transactions mn
1.14 (12.32) -19% 0.35 (3.8) 0.33 (3.6) -25%
sq m (mn sq ft)
Average transacted rent
INR/sq m/month (INR/sq 861 (80) 0% 904 (84) 775 (72) -14%
ft/month)
Stock mn sq m (mn sq ft) 16.18 (174.2) 6% 15.7 (168.7) 16.7 (179.0) 6.3%
Vacancy (%) 9.3% 6.5% 11.3% -
Source: Knight Frank Research20 I N D I A R E A L E S TAT E - B E N G A L U R U
BENGALURU OFFICE MARKET ACTIVITY
Completions (mn sq m) Transactions (mn sq m)
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0.0
Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021
Source: Knight Frank Research
• The second wave of COVID-19 and the consequent lockdown • With pressure on rent, average transacted rent in H1 2021 was
abruptly halted transaction activity in the market. On a cumulative recorded at INR 72/sq ft/month, down 14% YoY.
basis, H1 2021 saw transactions of 3.6 mn sq ft, which is lower by
• During this prolonged pandemic, Information Technology sector
25% YoY.
has accelerated its hiring momentum. As improving vaccination
• Office occupancy decision was temporarily kept in abeyance by milestones enhance mobility of workforce, this factor will serve as
the key driver Information Technology sector which led to this a key element to drive office demand in the country’s technology
decline. It was reflected in the sector’s transaction share, which capital.
slipped to 24% in H1 2021 from 37% in H1 2020. The Co-working
sector took 8% in the latest half yearly period compared to 20% in
same period last year. This dip in share of key driver industries was
captured by the Other Services sector, which took up 50% space.
This sector was represented by occupiers from e-commerce,
health care, education, real estate and logistics amongst others.
• The labour situation in the second wave was better managed
compared to the first wave and as a result, new completion of 1.81
mn sq ft was recorded during the lockdown affected Q2 2020.
Cumulatively for H1 2021, new completions of 5.2 mn sq ft at a 24%
YoY growth was recorded.
• Given that project completion was more than the transactions,
vacancy increased by 200 basis point to 11.3% during H1 2021.
• Among the business districts, ORR followed by PBD East
(Whitefield) and SBD, were the most active markets during H1 2021
with a transaction share of 34%, 29% and 25% respectively.21 I N D I A R E A L E S TAT E - B E N G A L U R U
BENGALURU OFFICE MARKET VACANCY
11.3%
12%
11.3%
10.2%
9.3%
10%
8.0%
8% vacancy in Bengaluru office market
6.5%
5.3%
6%
4.8%
4.8%
4.1%
3.7%
4%
2%
0%
Q4 2020
Q3 2020
Q2 2020
Q4 2019
Q1 2020
Q3 2019
Q2 2019
Q2 2021
Q1 2019
Q1 2021
Source: Knight Frank Research
BUSINESS DISTRICT CLASSIFICATION
BUSINESS DISTRICT MICRO MARKETS
Central Business District (CBD) and off CBD MG Road, Residency Road, Cunningham Road, Lavelle Road, Richmond Road, Infantry Road
Suburban Business District (SBD) Indiranagar, Koramangala, Airport Road, Old Madras Road
Peripheral Business District (PBD) East Whitefield
Peripheral Business District (PBD) South Electronic City, Bannerghatta Road
Peripheral Business District (PBD) North Thanisandra, Yelahanka, Devanahalli
Outer Ring Road (ORR) Hebbal ORR, Marathahalli ORR, Sarjapur Road ORR
Source: Knight Frank Research22 I N D I A R E A L E S TAT E - B E N G A L U R U
SECTOR-WISE TRANSACTIONS SPLIT IN H1
BUSINESS DISTRICT WISE TRANSACTIONS 2020 AND H1 2021
SPLIT IN H1 2020 AND H1 2021
H1 2020 H1 2021
8%
13% BFSI 4%
6% 5% Information
37% Technology 24%
9% Manufacturing 14%
22% Other Services 50%
20% Co-working 8%
H1 2020 8%
Note: BFSI includes BFSI support services Source: Knight Frank Research
AVERAGE DEAL SIZE AND NUMBER OF DEALS
35%
38% TREND
Average deal size Sq /m Number of deals
3% 9,000 160
5%
3%
8,000 140
29%
7,000
120
H1 2021
25% 6,000
100
Average deal size Sq /m
5,000
Number of deals
80
34% 4,000
Business district H1 2020 H1 2021 60
■ CBD & Off CBD 5% 3% 3,000
■ SBD 8% 25%
40
■ ORR 35% 34% 2,000
■ PBD East 38% 29%
■ PBD South 6% 3% 20
1,000
■ PBD North 8% 5%
■ PBD West 0%23 I N D I A R E A L E S TAT E - C H E N N A I
C
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I24 I N D I A R E A L E S TAT E - C H E N N A I
Expert Take
The Chennai office market recorded a YoY growth in office
leasing activity as well as new supply in Q2 2021. Office
space absorption of BFSI and Other Services sector has
seen a significant YoY growth. SBD continued to dominate
the office space demand share while demand picked up in
CBD and off-CBD locations during H1 2021.
OFFICE
MARKET
P R A D N YA N E R K A R
CHENNAI MARKET SUMMARY
PARAMETER 2020 CHANGE (YOY) H1 2020 H1 2021 CHANGE (YOY)
Completions
0.3 (3.3) 91% 0.3 (3.3) 0.08 (0.8) -75%
mn sq m (mn sq ft)
Transactions mn
0.4 (4.5) -13% 0.1 (1.3) 0.1 (1.2) -9%
sq m (mn sq ft)
Average transacted rent
INR/sq m/month (INR/sq 645 (60) 0% 653 (61) 645 (59.9) -1.3%
ft/month)
Stock mn sq m (mn sq ft) 7.1 (76.3) 5% 7.1 (76.2) 7.2 (77.1) 1%
Vacancy (%) 11.7% - 12.2% 12.7% -
Source: Knight Frank Research25 I N D I A R E A L E S TAT E - C H E N N A I
CHENNAI OFFICE MARKET ACTIVITY
Completions (mn sq m) Transactions (mn sq m)
0.35
0.30
0.25
0.20
0.15
0.10
0.05
0.00
Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021
Source: Knight Frank Research
• The Chennai office market recorded a growth in both demand and registered a positive YoY growth in H1 2021. The highest growth
new supply during Q2 2021 as compared to Q2 2020. was seen in the Banking, Financial Services and Insurance (BFSI)
sector’s office space absorption that recorded 87% YoY increase,
• In terms of half-yearly completions, 0.08 mn sq m (0.8 mn sq ft)
followed by 37% YoY increase in the leasing activity of the Other
entered the Chennai office market during H1 2021, recording a
Services sector.
75% YoY fall. However, this significant fall is attributable to the high
base of H1 2020. Large new supply of 0.3 mn sq m (3.3 mn sq ft) • The Co-working sector accounted for only 6% share in the total
was recorded last year as two large buildings received Occupancy H1 2021 transactions pie and recorded a significant 34% YoY
Certificates. decrease in its office space absorption this year. This dip is
attributable to the COVID-induced market exigencies that has
• 62% of the H1 2021 new supply was accounted for by a large
impacted the demand within co-working facilities in H1 2021 in
building (0.05 mn sq m / 0.5 mn sq ft) located in the Peripheral
Chennai.
Business District (PBD) – Old Mahabalipuram Road (OMR) and
Grand Southern Trunk Road (GST). • Geographically, the thriving Suburban Business District (SBD)
comprising Guindy and Nandambakkam continued to dominate
• On the demand front, quarterly transactions registered a YoY
with a 48% share in the total transactions activity of H1 2021.
growth in Q2 2021. However, on the half-yearly front, the market
However, in absolute terms, this business district recorded a 21%
witnessed a 9% YoY fall in H1 2021 with 0.1 mn sq m (1.2 mn sq ft)
YoY fall in leasing volumes, going down from 0.07 mn sq m (0.7 mn
of office space absorption recorded during this period. This fall is
sq ft) in H1 2020 to 0.05 mn sq m (0.5 mn sq ft) in H1 2021.
largely on account of the lull in business activity resulting from the
pandemic-induced exigencies. • On the other hand, the Central Business District (CBD and off CBD)
witnessed a 28% YoY growth in office space absorption in H1 2021
• In terms of industry share, the Information Technology (IT) sector
as activity picked up in T Nagar, RK Salai and Nungambakkam
accounted for the highest share of 44% in the total H1 2021
micro-markets.
absorption. This was followed by the 33% demand share of the
Other Services sector which includes consulting, healthcare, • Although the number of deals recorded went up from 37 in H1 2020
education, logistics and other such companies. to 70 in H1 2021, the average deal size fell by a significant 52% YoY,
from 3,347 sq m (36,027 sq ft) in H1 2020 to 1,602 sq m (17,247 sq ft)
• However, in terms of growth in leasing activity, only two industries26 I N D I A R E A L E S TAT E - C H E N N A I
in H1 2021.
CHENAAI OFFICE MARKET VACANCY
• The city-level average transacted rentals inched down
marginally by 1% YoY, from INR 653 / sq m (INR 61 / sq ft)
16%
14.1%
in H1 2020 to INR 645 / sq m (INR 60 / sq ft) in H1 2021. On
account of the ongoing market challenges, developers have
temporarily extended various qualitative and quantitative 14%
considerations to their existing as well as new tenants which
has caused the office rentals to slide down marginally.
12.7%
12%
12.5%
12.2%
• The city-level office market vacancy inched up from 12.2% in
11.7%
H1 2020 to 12.7% in H1 2021.
10%
10.4%
10.2%
10.1%
9.0%
8.8%
8%
6%
4%
87%
2%
0%
Q4 2020
Q3 2020
Q2 2020
Q4 2019
Q1 2020
Q3 2019
Q2 2019
Q2 2021
Q1 2019
Q1 2021
YoY growth in BFSI office space
demand in H1 2021
Source: Knight Frank Research
BUSINESS DISTRICT CLASSIFICATION
BUSINESS DISTRICT MICRO MARKETS
Central Business District (CBD and off CBD) Anna Salai, RK Salai, Nungambakkam, Greams Road, Egmore, T Nagar
Suburban Business District (SBD) Mount – Poonamallee Road, Porur, Guindy, Nandambakkam
SBD – Old Mahabalipuram Road (OMR) Perungudi, Taramani
Peripheral Business District (PBD) – OMR and
OMR beyond Perungudi Toll Plaza, GST Road
Grand Southern Trunk Road (GST)
PBD – Ambattur Ambattur
Source: Knight Frank Research27 I N D I A R E A L E S TAT E - C H E N N A I
SECTOR-WISE TRANSACTIONS SPLIT IN H1
BUSINESS DISTRICT WISE TRANSACTIONS 2020 AND H1 2021
SPLIT IN H1 2020 AND H1 2021
H1 2020 H1 2021
5% 5% BFSI 11%
Information
54% Technology 44%
11% Manufacturing 6%
20% 22% Other Services 33%
8% Co-working 6%
H1 2020 13% Note: BFSI includes BFSI support services Source: Knight Frank Research
7%
AVERAGE DEAL SIZE AND NUMBER OF DEALS
TREND
55% Average deal size Sq /m Number of deals
5,000 120
3% 18%
4,500
100
19% 4,000
3,500
H1 2021 80
3,000
Average deal size Sq /m
12%
Number of deals
2,500 60
48%
2,000
40
Business district H1 2020 H1 2021 1,500
■ CBD 13% 18%
1,000
■ SBD 55% 48%
20
■ SBD OMR 7% 12%
500
■ PBD OMR & GST 20% 19%
■ PBD Ambattur 5% 3%
0 0
H1 2018 H2 2018 H1 2019 H2 2019 H1 2020 H2 2020 H1 2021
Source: Knight Frank Research
Source: Knight Frank Research
BUSINESS DISTRICT-WISE RENT MOVEMENT
Rental value range in H1 2021 in
Business district 12-month change 6-month change
INR/sq m/month (INR/sq ft/month)
CBD 700–1,023 (65–95) -1% 0%
SBD 592–861 (55–80) 0% 0%
SBD OMR 581–980 (54–91) -0.5% 0%
PBD OMR and GST Road 280–430 (26–40) 0% 0%
PBD Ambattur 301–377 (28–35) -1.5% 0%
Source: Knight Frank Research28 I N D I A R E A L E S TAT E - H Y D E R A B A D
H
Y
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D29 I N D I A R E A L E S TAT E - H Y D E R A B A D
Expert Take
The Hyderabad office market recorded a YoY growth in
office space absorption in Q2 2021. The office leasing
activity of the Other Services, BFSI and Co-working sectors
grew substantially during H1 2021. The SBD comprising
the HITEC City continued to dominate the transaction
share in H1 2021 as well.
OFFICE
MARKET
P R A D N YA N E R K A R
HYDERABAD MARKET SUMMARY
PARAMETER 2020 CHANGE (YOY) H1 2020 H1 2021 CHANGE (YOY)
Completions
0.8 (8.7) -20% 0.3 (3.8) 0.07 (0.8) -80%
mn sq m (mn sq ft)
Transactions mn
0.6 (6.0) -53% 0.2 (2.2) 0.1 (1.6) -27%
sq m (mn sq ft)
Average transacted rent
INR/sq m/month (INR/sq 658 (61) 0% 667 (62) 664 (61.7) -1%
ft/month)
Stock mn sq m (mn sq ft) 7.8 (83.9) 11% 7.2 (78) 7.9 (84.7) 7%
Vacancy (%) 9.4% - 8.9% 12.3% -
Source: Knight Frank Research30 I N D I A R E A L E S TAT E - H Y D E R A B A D
HYDERABAD OFFICE MARKET ACTIVITY
Completions (mn sq m) Transactions (mn sq m)
0.6
0.5
0.4
0.3
0.2
0.1
0.0
Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021
Source: Knight Frank Research
• The Hyderabad office market recorded a YoY growth in demand sector’s office space absorption increased from 0.002 mn sq m
during Q2 2021. (0.02 mn sq ft) in H1 2020 to 0.02 mn sq m (0.2 mn sq ft) in H1 2021.
Other industries to record YoY growth in office leasing volumes in
• On a half-yearly basis, completions fell substantially from 0.3 mn sq
H1 2021 are the Banking, Financial Services and Insurance (BFSI)
m (3.7 mn sq ft) in H1 2020 to 0.07 mn sq m (0.7 mn sq ft), an 80%
sector with 147% YoY and the Co-working sector with 108% YoY
YoY fall. The slow pace of regulatory clearance to ready buildings
increase.
due to lockdowns was one of the reasons for the slump in the
recorded number of supply in H1 2021. • The Co-working sector absorption almost doubled in H1 2021 as it
went up from 0.02 mn sq m (0.2 mn sq ft) in H1 2020 to 0.03 mn sq
• New supply continues to be concentrated in the west of Hyderabad
m (0.4 mn sq ft) in H1 2021.
i.e. Suburban Business District (SBD) and Peripheral Business
District (PBD) West as demand continues to remain strong in HITEC • In terms of geography, 93% of the total H1 2021 transactions were
City, Financial District and other western suburbs. concentrated in SBD whereas the remaining 7% were accounted
for in the PBD West business district. In terms of absolute volumes,
• While demand registered a growth on the quarterly front, office
PBD West recorded an 88% YoY fall in transaction activity while the
space absorption came down by 27% YoY in H1 2021 with a total
HITEC City-dominated SBD continued to grow even in H1 2021.
of 0.1 mn sq m (1.6 mn sq ft) transacted space recorded during this
period. The transaction activity momentum was hindered by the • The average deal size has also seen an 18% YoY fall in H1 2021 as it
pandemic-induced lull in business activity. came down from 6,992 sq m (75,262 sq ft) in H1 2020 to 5,720 sq m
(61,657 sq ft) in H1 2021.
• On the industry front, the Information Technology (IT) sector
continued to be the driver industry with 48% share in the total • The city-level average transacted rent slipped by a marginal 0.5%
transactions pie of H1 2021. However, in absolute terms, the sector YoY in H1 2021, down from INR 667 / sq m / month (INR 62 / sq ft /
witnessed a 53% YoY fall in its office space absorption, down from month) to INR 664 / sq m / month (INR 61.7 / sq ft / month).
0.1 mn sq m (1.6 mn sq ft) in H1 2020 to 0.07 mn sq m (0.8 mn sq ft)
• The vacancy levels in Hyderabad office market have inched up to a
in H1 2021.
double-digit range in H1 2021, going up to 12.3%.
• On the other hand, the Other Services sector which includes
consulting, healthcare, education, logistics and other such
companies recorded a huge jump in leasing volumes as the31 I N D I A R E A L E S TAT E - H Y D E R A B A D
HYDERABAD OFFICE MARKET VACANCY
14%
12.3%
147%
11.8%
12%
9.9%
9.4%
8.9%
10%
YoY growth in BFSI office space
demand in H1 2021
8%
7.3%
7.1%
7.0%
7.0%
6.8%
6%
4%
2%
0%
Q4 2020
Q3 2020
Q2 2020
Q4 2019
Q1 2020
Q3 2019
Q2 2019
Q2 2021
Q1 2019
Q1 2021
Source: Knight Frank Research
BUSINESS DISTRICT CLASSIFICATION
BUSINESS DISTRICT MICRO MARKETS
Banjara Hills, Jubilee Hills, Begumpet, Ameerpet, Somajiguda, Himayat Nagar, Raj Bhavan
Central Business District (CBD and off CBD)
Road, Punjagutta
Suburban Business District (SBD) HITEC City, Kondapur, Manikonda, Kukatpally, Raidurg
Peripheral Business District (PBD) West Gachibowli, Kokapet, Madinaguda, Nanakramguda, Serilingampally
Peripheral Business District (PBD) East Uppal, Pocharam
Source: Knight Frank Research32 I N D I A R E A L E S TAT E - H Y D E R A B A D
SECTOR-WISE TRANSACTIONS SPLIT IN H1
BUSINESS DISTRICT WISE TRANSACTIONS 2020 AND H1 2021
SPLIT IN H1 2020 AND H1 2021
H1 2020 H1 2021
3% BFSI 12%
Information
75% Technology 48%
12% Manufacturing 7%
1% Other Services 10%
8% Co-working 23%
Note: BFSI includes BFSI support services Source: Knight Frank Research
H1 2020
42%
AVERAGE DEAL SIZE AND NUMBER OF DEALS
58% TREND
Average deal size Sq /m Number of deals
7% 10,000 140
9,000
120
8,000
H1 2021 100
7,000
6,000
Average deal size Sq /m
80
Number of deals
5,000
93%
60
4,000
3,000 40
Business district H1 2020 H1 2021
2,000
■ CBD & Off CBD 0% 0%
20
■ PBD East 0% 0%
1,000
■ PBD West 42% 7%
■ SBD 58% 93% 0 0
H1 2018 H2 2018 H1 2019 H2 2019 H1 2020 H2 2020 H1 2021
Source: Knight Frank Research
Source: Knight Frank Research
BUSINESS DISTRICT-WISE RENT MOVEMENT
Rental value range in H1 2021 in
Business district 12-month change 6-month change
INR/sq m/month (INR/sq ft/month)
CBD and Off-CBD 592-646 (55-60) -1% -1%
SBD 732-786 (68-73) 0% -1%
PBD West 592-646 (55-60) -1% -1%
PBD East 323-377 (30-35) -2% -1%
Source: Knight Frank Research33 I N D I A R E A L E S TAT E - K O L K ATA
K
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A34 I N D I A R E A L E S TAT E - K O L K ATA
Expert Take
Kolkata witnessed muted demand for office spaces as lock-
down in April 2021 led to delayed decision making on new
occupancy. High office space vacancy in H1 2021, with ten-
ants demanding flexibility and sub-leasing arrangements,
have led to a softening of rents compared to the past. Second
generation office spaces are being remodelled and let out
with amenities for co-working, a trend which is catching on
OFFICE amongst occupiers in the Information
MARKET Technology sector, more so, after the pandemic outbreak.
KOLKATA MARKET SUMMARY
PARAMETER 2020 CHANGE (YOY) H1 2020 H1 2021 CHANGE (YOY)
Completions
0.01 (0.10) -98% 0.01 (0.1) - -
mn sq m (mn sq ft)
Transactions mn
0.09 (0.92) -32% 0.04 (0.5) 0.02 (0.3) -46%
sq m (mn sq ft)
Average transacted rent
INR/sq m/month (INR/sq 385 (35.8) -7% 415 (38.6) 375 (34.8) -10%
ft/month)
Stock mn sq m (mn sq ft) 2.94 (31.6) 0% 2.94 (31.6) 2.94 (31.6) 0%
Vacancy (%) 41.7% - 41.4% 41.8% -
Source: Knight Frank Research
Note – 1 square metre (sq m) = 10.764 square feet (sq ft)35 I N D I A R E A L E S TAT E - K O L K ATA
KOLKATA OFFICE MARKET ACTIVITY
Completions (mn sq m) Transactions (mn sq m)
0.06
0.05
0.04
mn sq m
0.03
0.02
0.01
0.00
Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021
Source: Knight Frank Research
• The impact of the COVID-19 pandemic on Kolkata’s office real introducing any new supply. The pandemic situation also led
estate market was apparent in 2020. In line with H1 2020, H2 2020 occupiers to reassess their office space needs which shifted the
also experienced a low volume of office space take-up. With the developer focus from developing new office space inventory.
severity of the second wave manifesting in Q1 2021, office space
• Of the total office spaces transacted in H1 2021, Peripheral
consumption remained muted. In H1 2021, Kolkata recorded
Business District - I ([PBD-1] [Salt Lake City]) comprised an 81%
leasing transactions worth 0.02 mn sq m (0.03 mn sq ft), a YoY
share. In H1 2020, this micro-market accounted for a 92% share in
decline of 46%. Various parts of Kolkata underwent disturbances
the city’s total office space leased. Due to the COVID-19 pandemic,
caused by the second wave of the pandemic during April to June
fewer deals were inked which reduced the share of this business
2021 which brought about a temporary pause in office space
district both in percentage and absolute square footage leased.
demand.
• In H1 2020, PBD-2 (Rajarhat New Town) had accounted for a 7%
• A historic low transaction base across the top eight cities and
share in the city’s overall leasing volume. In H1 2021, this share
the absence of any driver service industry for office space
reduced to 2%. Factors like upcoming metro connectivity, well-
consumption led to very high office vacancies, a trend that has
developed road infrastructure and proximity to the international
been prevalent since the past three years. This is largely due to a
airport as well as the IT/ITeS hub are yet to attract large enterprise
few business districts driving the office leasing transactions for the
clients which will enhance its tenant profile.
entire city. As the transaction volume has been declining, vacancy
at the end of June 2021 stood at 41.8%, 400 basis points higher • The IT/ITeS sector’s share in the gross leasing reduced from 52%
than a year ago. Kolkata’s office space vacancy also happens to be in H1 2020 to 36% in H1 2021. Due to the pandemic, many large IT/
the second highest amongst the vacancies recorded in India’s top ITeS tenants continue to reconsider new space take-up and there
eight markets. Tenants are demanding sub-leasing of their office has been a delay in decisions with regard to corporate real estate
spaces during the pandemic and are also vying for better terms deals.
with landlords. • During the current period, BFSI sector’s share remained at par
• In H1 2021, no new office supply was available as the city’s high with H1 2020 with 7%. The co-working sector’s share held steady
office market vacancy led developers to think judiciously before at 15%, much in line with H1 2020. The pandemic has attracted
tenants to co-working spaces and many companies in the IT/ITeS36 I N D I A R E A L E S TAT E - K O L K ATA
sector are moving there. While the square footage leased remains lockdown in April 2021 and mainly, small office space take-ups have
low, it is increasingly gaining in popularity due to the flexibility and been seen in the city. Salt Lake City, which accounts for a majority
amenities offered. of the office space leasing in Kolkata, noted a 10% YoY decrease
in rents due to a lack of deal activity like in previous years. Rajarhat
• During the H1 2021 period, the average transacted rents in
New Town also noted a 6% YoY decline in rents.
Kolkata noted a 10% annual decrease. Due to the second wave of
COVID-19 hitting the city, the demand for office spaces remained
low. The transaction volume has dipped substantially post the
60%
KOLKATA OFFICE MARKET VACANCY
55%
50%
42.8%
42.7%
41.8%
41.9%
41.7%
41.4%
41.4%
40.7%
45%
Of the total office spaces
40%
transacted in H1 2021,
32.3%
32.0%
35% Peripheral Business
District-1 ([PBD-1] [Salt
30% Lake City]) comprised an
81% share.
25%
20%
15%
Q4 2020
Q3 2020
Q2 2020
Q4 2019
Q1 2020
Q3 2019
Q2 2019
Q2 2021
Q1 2019
Q1 2021
Source: Knight Frank Research
BUSINESS DISTRICT CLASSIFICATION
BUSINESS DISTRICT MICRO MARKETS
Park Street, Camac Street, Theatre Road, AJC Bose Road, Elgin Road, Rabindra Sadan, Esplanade, Lenin
Central Business District (CBD) Sarani, S N Banerjee Road, Central Avenue, Dalhousie Square, Mangoe Lane, Brabourne Road, Chandni
and off CBD Chowk, Rawdon Street, Loudon Street, Lee Road, Lord Sinha Road, Hastings, Hare Street, Kiran Shankar
Ray Road, Upper Wood Street, Hungerford Street, Circus Avenue, Syed Amir Ali Avenue, Chowringhee
Suburban Business District
Topsia, JBS Haldane Avenue, EM Bypass-Park Circus Connector
(SBD-1) Park Circus Connector
Suburban Business District EM Bypass-Rashbehari Connector, Anandapur Main Road, Rajdanga, South Ballygunge, Ashutosh
(SBD-2) Rashbehari Connector Mukherjee Road, Gariahat, Hazra, Chetla, Jessore Road, Nagerbazar
Peripheral Business District
Salt Lake Sector V
(PBD-1) Salt Lake City
Peripheral Business District
Rajarhat New Town, BT Road, Bantala
(PBD-2) Rajarhat New Town37 I N D I A R E A L E S TAT E - K O L K ATA
SECTOR-WISE TRANSACTIONS SPLIT IN H1
BUSINESS DISTRICT WISE TRANSACTIONS 2020 AND H1 2021
SPLIT IN H1 2020 AND H1 2021
H1 2020 H1 2021
7% 6% BFSI 7%
1% Information
52% Technology 36%
10% Manufacturing 9%
17% Other Services 33%
15% Co-working 15%
Note: BFSI includes BFSI support services
H1 2020 Source: Knight Frank Research
92%
3%
2%
14% The pandemic has
attracted tenants to co-
H1 2021 working spaces and many
companies in the IT/ITeS
sector are moving there.
While the square footage
81%
leased remains low, it
is increasingly gaining
in popularity due to the
flexibility and amenities
Business district H1 2020 H1 2021 offered.
■ PBD-1 (Salt lake City) 92% 81%
■ CBD & Off CBD 1% 14%
■ PBD -2 (Rajarhat New Town) 7% 2%
■ SBD -2 (Rashbehari Connector) 0% 3%
■ SBD -1 (Park Circus Connector) 0% 0%
Source: Knight Frank Research38 I N D I A R E A L E S TAT E - K O L K ATA
AVERAGE DEAL SIZE AND NUMBER OF DEALS
TREND
Average deal size (sq m) Number of deals
2,500 40
35
2,000
30
Average deal size (sq m)
Number of deals
25
1,500
20
1,000
15
10
500
5
0 0
H1 2018 H2 2018 H1 2019 H2 2019 H1 2020 H2 2020 H1 2021
Source: Knight Frank Research
BUSINESS DISTRICT-WISE RENT MOVEMENT
Rental value range in H1 2021 in
Business district 12-month change 6-month change
INR/sq m/month (INR/sq ft/month)
CBD & Off CBD 700–1,023 (65–95) -6% -6%
SBD-I (Park Circus Connector) 538–753 (50–70) 0% 0%
SBD-II (Rashbehari Connector) 538–915 (50–85) -10% -10%
PBD-I (Salt Lake City) 312–517 (29-48) -10% -3%
PBD-II (Rajarhat New Town) 258–452 (24-42) -6% -3%
Source: Knight Frank Research39 I N D I A R E A L E S TAT E - M U M B A I
M
U
M
B
A
I40 I N D I A R E A L E S TAT E - M U M B A I
Expert Take
The leasing activity in the MMR office market has been
subdued due to the extended pandemic situation. Owing to
its high case load during the first wave, MMR was amongst
the last of the top 8 cities to allow office activities resume at
enhanced capacity. Though offices were allowed to open at
10% capacity in June 2020, the capacity was enhanced to 30%
only in September 2020. Further, there were restrictions on
access to local trains which were lifted only in February 2021.
As a result, occupiers were forced to go slow on their office re-
OFFICE
occupancy and leasing plans. To add to the woes, Maharashtra
MARKET was the amongst the first states to go into a lockdown again
on 5th April 2021 due to the second wave of pandemic. After
suffering for two consecutive quarters, the office demand had
started to recover towards the end of Q4 2020 and improved
further in Q1 2021, but the segment received a another
jolt towards the end of Q1 2021 due to the second wave of
pandemic. This pent up demand is likely to come back as
the restrictions are eased and pace of vaccination improves
further.
NIBODH SHETTY
MMR MARKET SUMMARY
PARAMETER 2020 CHANGE (YOY) H1 2020 H1 2021 CHANGE (YOY)
Completions
0.49 (5.3) -2% 0.34 (3.6) 0.12 (1.3) -65%
mn sq m (mn sq ft)
Transactions mn
0.56 (6.0) -38% 0.36 (3.9) 0.15 (1.6) -58%
sq m (mn sq ft)
Average transacted rent
INR/sq m/month (INR/sq 1,246 (116) -5.6% 1,292 (120) 1,173 (109) -9.2%
ft/month)
Stock mn sq m (mn sq ft) 14.1(151.3) 4% 13.9 (149.6) 14.2 (152.6)
Vacancy (%) 19.8% - 17.9% 19.7% -
Source: Knight Frank Research41 I N D I A R E A L E S TAT E - M U M B A I
MMR OFFICE MARKET ACTIVITY
Completions (mn sq m) Transactions (mn sq m)
0.25
0.20
0.15
0.10
0.05
0.00
Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021
Source: Knight Frank Research
• The MMR office market witnessed a 58% Year-on-Year (YoY)
decline in transaction activity during H1 2021. This drop in leasing While several other cities
was primarily on account of two factors: the extended lockdown
have removed most
scenario in the MMR and the high base of Q1 2020 which was
a period when the office markets across India were enjoying a
restrictions on office
multiyear bull run. usage imposed during the
• The transaction activity in MMR had started recovering towards second wave, Maharashtra
the end of 2020 and had improved further in Q1 2021. However, has gone slow on lifting
the second wave stalled this upward momentum. The maximum
restrictions. As witnessed
brunt of the second wave of pandemic was borne in Q2 2021
as a complete lockdown was enforced on 5th April 2021 which
last year, the transaction
continued till 7th June. The lockdown restrictions were only partly activity is likely to recover
lifted post that; with office capacity being capped at 50% till end of once these restrictions are
June and restrictions on office timings.
relaxed.
• In H1 2021, completions were down 65% YoY. Developers went
slow citing labour shortages, increase in construction costs
and slow take up of new space. Moreover, once the projects
receive Occupancy Certificate (OC) the developer has to start
paying property tax on it which adds to the costs. Consequently,
developers are deferring the process of applying for OC. Only two
out of the six business districts of the city – SBD Central and BKC &
off BKC – witnessed an addition of new supply in H1 2021.42 I N D I A R E A L E S TAT E - M U M B A I
MMR OFFICE MARKET VACANCY
20%
19%
58%YoY drop in leasing activity in H1
2021
18%
17%
16%
15%
Q4 2020
Q3 2020
Q2 2020
Q4 2019
Q1 2020
Q3 2019
Q2 2019
Q2 2021
Q1 2019
Q1 2021
Source: Knight Frank Research
• The vacancy level in MMR was largely stable at around 19.7%, as demand
and supply maintained a near balance since Q4 2020.
BUSINESS DISTRICT CLASSIFICATION
BUSINESS DISTRICT MICRO MARKETS
CBD & Off-CBD Nariman Point, Cuffe Parade, Ballard Estate, Fort, Mahalaxmi
Bandra Kurla Complex & Off-Bandra Kurla Complex (BKC & Off-BKC) BKC, Bandra (E), Kalina and Kalanagar
Central Mumbai Parel, Lower Parel, Dadar, Prabhadevi, Worli
SBD West Andheri, Jogeshwari, Goregoan, Malad
SBD Central Kurla, Ghatkopar, Vikhroli, Kanjurmarg, Powai, Bhandup, Chembur
PBD Thane, Airoli, Vashi, Ghansoli, Rabale, Belapur43 I N D I A R E A L E S TAT E - M U M B A I
BUSINESS DISTRICT WISE TRANSACTIONS SECTOR-WISE TRANSACTIONS SPLIT IN H1
SPLIT IN H1 2020 AND H1 2021 2020 AND H1 2021
H1 2020 H1 2021
14% 12%
41% BFSI 30%
Information
35% Technology
15%
11% Manufacturing 16%
10% Other Services 27%
14% H1 2020 02%
3% 12%
Co-working
Note: BFSI includes BFSI support services
Source: Knight Frank Research
41% 17%
• The BFSI sector continued to dominate leasing activity in MMR
garnering 30% share of transactions in H1 2021. The ‘Other
16% Services’ sector accounted for the second highest share or 27%
of the total leasing in H1 2021. The space take up from the ‘Other
Services’ sector was led by companies in retail, education and
consulting segments.
03%
• Co-working operators have become more active after the first wave
43% H1 2021
of the pandemic citing better growth prospects. The operators
04%
believe that many companies would avoid spending on creating
new office spaces and prefer to take up ready office spaces that
11% can be scaled up or down as required. The space take up from the
co-working segments grew by 54% YoY in H1 2021. The share of
23%
this sector in overall transactions increased from 3% in H1 2020
to 12% in H1 2021. The sector had also garnered 18% share of
Business district H1 2020 H1 2021 transactions in H2 2020. In the pre-pandemic era i.e. before H2
■ BKC & Off-BKC 12% 16% 2020, the share of space take up co-working operators has never
■ CBD & Off-CBD 2% 3% crossed double digits in any half yearly period.
■ Central Mumbai 17% 4%
■ PBD 41% 11%
■ SBD Central 14% 23%
■ SBD West 14% 43%
Source: Knight Frank Research
• While the overall transactions fell across business districts on
a YoY basis during H1 2021, SBD West had the highest share of
transactions in H1 2021, followed by SBD Central at 43% and 23%
respectively.
• The share of Central Mumbai dropped from 17% in H1 2020 to 4%
in H1 2021. Central Mumbai also witnessed the highest decline in
transaction activity of 75% YoY in the same period.You can also read
