Third quarter office rebound growth was led by Bengaluru and Hyderabad, which together accounted for nearly 80% of the net absorption in Q3 2020. The heightened activity in Bengaluru indicates a gradual resurgence in take up of spaces coupled with the translation of pent up demand from Q2 this year. While we continue to see the impact of the pandemic on various businesses, there is a significant surge in activity across most office markets under consideration. This is seen in gross leasing which more than doubled from the previous quarter at 13.8 million sq. ft. At the same time, it is important to note that large and mid-sized occupiers across major markets continue to review their real estate portfolios in a bid to optimize cost, higher emphasis is being given on sustainability and employee well-being as well as adoption of flexible working practices.
New completions during Q3 2020 increased by 59% quarter-on-quarter with 9.2 million sq. ft of new stock coming to market. “With lockdown restrictions being relaxed in the third quarter in most of the markets under review, office projects in the final stages of construction or pending receipt of occupancy certificates came onboard. This resulted in an increase in the supply of office space, even surpassing 8.6 million sq. ft witnessed in Q1 2020. Except for Bengaluru, which witnessed a marginal increase in rents, office rents in Q3 2020 vs. Q2 2020 remained stable across all markets under review. With stable rental values and low vacancy levels, the office market in India continues to be landlord favourable. However, it is important to note that landlords across markets have become more flexible in providing increased rent-free periods, reduced rental escalation and fully furnished deals to prominent occupiers, which reduces their net outgo.