Rentals under pressure due to rising vacancy, supply additions

By: |
July 22, 2021 4:15 AM

Technology, BFSI, consulting and manufacturing occupiers are likely to lead the demand in 2021. Several occupiers will continue with hybrid workplace strategies in the coming months that will result in asset light portfolios, mostly for mid-sized companies, it added.

On supply side, NCR has a strong pipeline of around 7.7 MSF in H2 2021, of which over 50% is likely to be completed in Noida, and the remaining in Gurgaon. Overall stock is expected to stand at 134.7 MSF at the end of 2021. (Representative image)

The demand for office spaces in Delhi NCR is expected to remain flat at 4.5 million sq ft (MSF) in 2021 compared to the year-ago period as occupiers will continue to adopt a cautious approach and focus on reassessing their real estate portfolio, Savills India said.

“Office leasing is likely to be at similar level as 2020, and therefore expected at approximately 4.5 MSF for 2021. Demand in the second half will be driven by relocations to the tune of approximately 2 MSF as occupiers will continue to adopt a cautious approach and focus on reassessing their real estate portfolio,” the real estate consulting firm said.

Technology, BFSI, consulting and manufacturing occupiers are likely to lead the demand in 2021. Several occupiers will continue with hybrid workplace strategies in the coming months that will result in asset light portfolios, mostly for mid-sized companies, it added.

Savills expects rentals to remain stable across most micro markets within Gurgaon, Noida and Delhi. However, rising vacancy levels are likely to exert downward pressure on rents in H2 2021. Vacancy rate rose to 22.5% as of June 2021 as the leasing momentum could not keep pace with new completions and several occupiers reviewed their real estate footprint. Average rental values have declined by around 3% Y-o-Y.

On supply side, NCR has a strong pipeline of around 7.7 MSF in H2 2021, of which over 50% is likely to be completed in Noida, and the remaining in Gurgaon. Overall stock is expected to stand at 134.7 MSF at the end of 2021.

“We expect market to remain active in second half of the year with more than 2.5 MSF of active requirements across Noida and Gurgaon, driven primarily by relocations and part expansions. Occupiers continue to review their overall portfolio strategy to align with post pandemic priorities of portfolio optimisation and growth. With technology sector remaining robust with increasing outsourcing from US markets, demand is likely to pick up towards end of fourth quarter and will help to fast track real estate commercial market recovery,” Savills India MD (Delhi NCR), Shweta Sawhney said.

The first quarter of 2021 saw market activity pick up but net absorption for H1 2021 remained muted compared to H1 2020. The region’s gross office absorption fell 38% Y-o-Y to 2 MSF in H1 2021. NCR saw an additional supply of 4 MSF, recording a decline of 12% compared to H1 2020.

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