Office space leasing may fall 30%

The demand for office space across seven major cities is likely to drop around 30 per cent this year from record leasing in 2019 as corporates have deferred expansion plans due to the Covid-19 pandemic, JLL India CEO and Country Head Ramesh Nair said.

JLL India, part of US-based JLL, is a leading property consultant with a turnover of over Rs 4,000 crore in the last financial year. In an interview, Nair said, "We expect office space leasing to fall by around 30 per cent during 2020.

Supply will also drop by 30-40 per cent as speculative construction will stop." In 2019, JLL India had reported a net leasing of 46.5 million sq ft, an all-time high. Asked about the rental outlook, Nair said, "Rentals will remain largely stable.

Not too much of reductions in rentals because supply is being pushed out and vacancies are still low." Real estate developers owning Grade-A office buildings have reported 92-98 per cent of rent collections during the lockdown period, he said.

Talking about the trend in the office market, Nair said the corporates have cut their requirements of office space in area terms by 20 per cent and are also negotiating for better terms, such as increased rent-free period for doing interiors before occupying the space.

The rentals for renewals, too, are being re-evaluated, he added. Nair said the corporates have started adopting the 'work for home' in their HR policies, as a result around 15 per cent of corporate workforce are expected to work from home at any given point of time.

The 'work for home' policy would have an adverse impact on office demand, he said but added that the need for larger space to maintain social distancing could compensate some of the possible loss in demand.

Nair said the space per employee had dropped to an average 80 sq ft per employees from 100-120 sq ft but this could again rise.

On residential real estate, he said the housing sales have improved of late but it was only 30 per cent of the pre-Covid-19 level.