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NCR Records Gross Office Leasing of 2.6 Mn sqft in H2 2020: Knight Frank India
IT/ITeS emerges as the biggest occupier, accounting for 44 per cent of the total office space leased in H2 2020; Residential asset class resets in H2 2020; Q4 2020 marks sales recovery to 90 per cent of 2019’s quarterly average: Knight Frank India
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Knight Frank India launched the 14th edition of its flagship half-yearly report - India Real Estate: H2 2020 - which presents a comprehensive analysis of the office and residential market performance across eight major cities for the July-December 2020 (H2 2020) period. According to the report, National Capital Region (NCR) recorded gross office leasing of 0.24 mn sq m (2.6 mn sq ft) in H2 2020, 24% higher than the level witnessed in H1 2020. The period witnessed 104 deals with an average deal size of 2,301 sq m (24,765 sq ft).
As per the report, the year began on a high note with office leasing achieving 95 per cent of the 2019’s quarterly average in Q1 2020. The government-imposed lockdown to combat the fury of the pandemic led to temporary economic inactivity in Q2 2020. This translated into a sharp fall in leasing activities in NCR in Q2 2020. However, with the gradual return to normalcy, gross leasing revived to 41% of 2019’s quarterly average in Q3 2020 and eventually rose to 79% in Q4 2020. Gurugram and Noida continued to dominate the overall leasing in H2 2020 with a 45% and 43% share respectively. The Secondary Business District (SBD) of Delhi witnessed a sharp jump in leasing with a 116% YoY increase over H2 2019.
The report states that the IT/ITes emerged as the biggest occupier in the NCR market in H2 2020. The sector, which garnered a 18% share in H2 2019, accounted for 44% of the total office spaces leased in H2 2020. Most IT/ITeS sector occupiers took up space in Noida and select locations in Gurugram such as Golf Course Extension Road, Sohna Road and Udyog Vihar.
In the residential sector, nearly 58% of total sales belonged to the category of ticket sizes greater than INR 5 million in the H2 2020 period. In 2020, the weighted average residential prices in NCR corrected by 4% over 2019. After the Covid-19 outbreak, some developers have started offering innovative schemes such as property swaps to allow homebuyers to swap a unit in a stalled project for another piece of the finished or nearly finished property.
The report also pointed out that due to huge supply infusion in 2019, new office supply remained limited in 2020. In H2 2020, 0.20 mn sq m (2.1 mn sq ft) new office spaces came on the block in NCR. Due to the pandemic, 71% of 2020’s new supply infusion became available only in the second half of the year. About 73% of the total new supply in H2 2020 was concentrated in Gurugram, followed by Noida (21%) and SBD Delhi (6%).
Due to revisions in real estate space requirements and altered preferences of occupiers in the new normal, weighted average rents in 2020 corrected by 4% YoY. In the wake of the pandemic, diversifying across multiple small offices has also emerged as a trend in NCR, the report said.
Co-working operators took up spaces selectively across NCR in H2 2020. From a 3% share in H1 2020’s total leasing, it increased to 12% in H2 2020. Co-working operators established office footprint in Delhi in locations such as Okhla and Defence Colony. In Gurugram, it was Udyog Vihar, Qutub Plaza and Sector-45 that attracted co-working players, it said.
Mudassir Zaidi, Executive Director – North, Knight Frank India said “The Covid-19 pandemic fury has altered the demand-supply functionality in the real estate sector. Being true to commercial real estate in NCR, the occupiers are treading through some very uncertain times and relooking at flexible office space solutions for their short-term office requirements”.
He further added, “Noida is emerging as a commercial hot spot of NCR region and has the potential to become the premium market for attracting domestic fund flow in the region in the long term. New supply of premium office assets and cheaper rentals in comparison to Delhi and Gurugram’s prime business districts has increased occupier demand for office spaces in Noida. The rental values in NCR have remained stable in the second half of the year 2020 and is expected to chart in same trajectory in 2021.”
The report also pointed out that in 2020, 9,824 residential units were launched across NCR, a 57% decline over 2019. This is due to the enforced lockdown and closure of construction sites in the first half of the year. However, in Q3 2020, new residential launches recovered to 72% of 2019’s quarterly average strengthening to 75% of the same in Q4 2020.
Zaidi said, “While Gurugram and Noida continue to lead on various residential asset class statistics, Ghaziabad is seen continuously gaining its dominance on the NCR’s residential map. This is largely due to developers trying to capitalize on the latent demand in locations such as Raj Nagar Extension, Siddhartha Vihar and Mohan Nagar where affordable and mid-segment products have been receiving good response from buyers.”
He further added, “In NCR, a huge chunk of demand is also skewed towards plotted developments as they are much cheaper and offer easy possession compared to under-construction projects. Many established developers are foraying into plotted development schemes with vigour and have recently launched them in Noida, Noida Extension, New Gurugram and Dwarka Expressway. Independent plots, as well as plots in established townships, are both becoming popular in the new normal, a trend which is here to stay.”