Office space Demand drops 3% but rents go up 8% in top cities

New Delhi: Demand for office spaces dropped three percent during the first quarter (Jan-March) of the current calendar year, However, rents went up by up to 8 percent in five big cities of Mumbai, Bengaluru, Chennai, Hyderabad and Kolkata.

In Bengaluru and Hyderabad, the monthly average rent increased 8 percent. While it was Rs 75.5 per square feet in Bengaluru, it was Rs 62 per square feet in Hyderabad. 

Tamil Nadu’s capital Chennai witnessed 5 percent jump in rents at Rs 60 per square feet. Mumbai too saw an increased. The increase in Maximum City was 2 percent at Rs 125 per square feet per month,  according to a report by US based property consultant Vestian.

In the wake of the Covid19 pandemic, the consultant expects drop in demand for office spaces in the short-to-medium term. Even the growth in rents is expected to be slower.

The rents in Kolkata were stable at Rs 48 per square feet. 

About 9.18 million square feet office space was absorbed in these five top cities. This was about 3 percent lower than the absorption seen in the corresponding period in the previous year.

Most of the office space absorption was seen in the first 2 months of the first quarter of the current calendar year. The pandemic has resulted in deferment of many large scale leasing deals. 

In Bengaluru, office space leasing declined 11 percent to 3.53 million square feet. Kolkata witnessed a decline of a massive 57 percent to just 0.15 million square feet. Hyderabad saw a decline of about 25 percent to just 1.64 million square feet of office space. 

Mumbai was quite different. Office space leasing in the Maximum City jumped 31 percent to 2.39 million square feet. Office space leasing in Chennai jumped 23 percent to 1.47 million square feet.

Completions of new office spaces declined by about 22 percent I the latest quarter as compared to the same period of previous year. The new space completion stood at 7.5 million square feet in these top cities. 

"The ensuing lockdown to contain the COVID-19 outbreak has resulted in large-scale repercussions across the industry, the consequences of which will be witnessed in the subsequent 3 or 4 quarters," said Shrinivas Rao, CEO-Asia-Pacific, Vestian.