While most offices remained empty for the last one year due to the COVID-19 pandemic, the real estate is now pinning its hope on the IT hiring spree as approximately 90 million squre feet space spread across six major real estate hubs- Bengaluru, Mumbai, Pune, Chennai, Gurugram and Noida is coming up for renewal in 2021. Totalling almost 7400 leases, 2021 has the highest lease expiry in the pipeline. A report by SURFACES REPORTER (SR).
According to the data compiled by ANAROCK, Bengaluru has the highest share of about 37 percent out of the 90 mn square feet coming up for renewal. In comparison, Mumbai is at the second place with 19%. Pune and Gurugram are at third and fourth positions respectively with the former having 17% and latter at 15%. Noida is at the bottom end with as little as 3 percent.
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Meanwhile, the data also suggests that the ongoing year has the highest lease expiry pipeline in comparison to the upcoming 2022 and 2023. According to an estimate, 2022 may see nearly 7,000 leases for approximately 78 million square feet come up for renewal, while an approximate 4,200 leases for over 55 million square feet in 2023.
"The office market has been under strain since the pandemic came in. However, the IT, ITeS sectors have been on a hiring spree in 2020 and 2021 due to massive business accruals. To accommodate these employees in a future, when we see a gradual return of employees and adoption of hybrid workplace practices by infotech giants, office space demand will grow" said Prashant Thakur, Director & Head - Research, ANAROCK Property Consultants.
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While the robust hiring by big companies is expected to help the sector with lease renewals, smaller companies might look to give up space.
"The leases coming up for renewal in 2021 were entered into at much lower rentals - at rates that prevailed 3 to 5 years ago - since office leases are usually signed for the long-term. There is some room for rental escalation in many of these leases," said Mr. Thakur.
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The average vacancy levels in Grade A office space across the top 7 cities is up again, breaching the 15 per cent mark. Rising COVID-19 cases in cities like Mumbai Metropolitan Region (MMR) and Bengaluru, the markets with highest commercial demand, and stringent curfew restrictions are cause for concern, said the report.
Text credit: Business Today
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