India Real Estate
Market Update Q1
2020: Office

April 17, 2020

A global economic slowdown accompanied by India’s slower GDP growth in 2019 dampened market sentiments. Amidst this challenging economic climate, the office market across the top seven cities in India set new benchmarks. The year 2020 presents challenges as uncertainty grips the world with the outbreak of COVID-19. The implied real GDP growth of 5 per cent for FY 2019-20 in the second advance estimates of the National Statistics Office, is now at risk from the pandemic’s impact on the economy. 

The last month of Q1 2020 saw most businesses defer their real estate decisions due to the impending crisis. With a nationwide lockdown in place, there was enhanced emphasis on business continuity plans and management of costs to mitigate the adverse effects of the pandemic. Net absorption of office spaces in Q1 2020 witnessed a decline of 30% from the peak observed in Q1 2019. Furthermore, construction activity and the process of obtaining requisite approvals from the government also slowed down in the beginning of March, in line with growing concerns of the impact of COVID 19, before it came to a standstill. New completions were recorded at 8.6 mn sq ft in the first quarter of 2020, a 40% drop as compared to the same period last year.

India office snapshot

Note: Top 7 cities include Delhi NCR, Mumbai, Bengaluru, Chennai, Hyderabad, Pune and Kolkata. Source: Real Estate Intelligence Service (REIS), JLL Research

In the medium to long run, the current health crisis will lead to corporates re-evaluating their commercial real estate strategy to make it more resilient to such shocks. Business continuity plans and remote working strategies have been successful. Hence, future demand from occupiers is likely to consider the need for flexible workspace. This could encourage occupiers to reduce capital costs, place greater emphasis on employee wellbeing and sustainability, and fast track the adoption of flex working practices.

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