– H1 2020

SPOTLIGHT Market Watch Savills Research Office Mumbai Market Watch - Office - H1 2020 Mumbai Market Watch - Office - H1 2020

World Economic India’s Economy & Real Estate Features The same report, projects India’s real GDP The exemplary lockdown which stretched to reckoned to be among the largest financial growth to tread into the negative zone (at nearly 50 days, before the unlocking process supports globally. The world entered 2020 with expectations of -4.5%) during the 2020 fiscal year. However, began towards the close of H1-2020, was one Overall, the economic recovery is rivetted steady GDP growths across geographical pockets, the recovery is expected to be sharp in the of the largest implemented lockdowns. Amidst strongly on a scientific solution to the current with significant improvements in emerging following year, i.e. in 2021 fiscal year, at 6%. the crisis and the resultant slowdown, the problem. The hopes of a breakthrough have economies. central government announced an economic The Reserve , on May 22nd 2020, consistently risen as the first half of 2020 package of approx. USD 265 billion, which estimated that the impact of the COVID crisis ended. The projections and estimates, however, were was approx. 10% of the country’s GDP. It is deeply dented by the entirely unforeseen may last till the mid-2021. event – the Black Swan – COVID-19. IMF’s World Economic Outlook Update June 2020 (A Crisis Like No Other, An Uncertain Recovery) India’s Office Real Estate in Citywise Demand Split Demand Comparisons: H1 2019 vs H1 2020 highlights a few things, which are important H1-2020 & Comparisons indicators. The chart below encapsulates the The office markets have clearly mirrored the It is important to take a quick view H1 2019 H1 2020 YOY Decline summary of the update. overall economic pattern in the country. of the mid-year demand patterns 9 0%

1%

4%

4%

9% The key features are: and present a brief year-on-year 8 3% -10%

-7

-2

-6

6% -1

-7 For the top 6 markets of Delhi NCR, Mumbai, -2 comparison for each of the six cities. 1. Global growth is projected at –4.9% in 2020. Bangalore, Chennai, Pune & Hyderabad 7 -20%

ft.) 6 -30% (which we reported in Office Market Watch The demand continues to be driven 2. China may remain the only economy in the 5 -40% Year-end 2019) Office absorption and supply by BFSI and IT across all the positive-growth zone at the end of 2020. 4 -50%

recorded significant Y-O-Y declines, as shown cities, with Mumbai experiencing (mn. sq. 3 -60% 3. Emerging economies may require the here. a substantial 36% from Consulting 2 -70% complete 2020 calendar year to stage a firms (incorporated within ‘Others’ From nearly 32.3 mn sq. ft. of space absorbed 1 -80% recovery. in the chart below). 0 -90% in H1-2019, the H1-2020 absorption fell e 4. The advanced economies, however, may face a to approx. 13.7 mn sq. ft. Similarly, the A broader and macro look reveals NCR abad Pune Mumbai Chennai der Bangalor greater uphill task and for longer. cumulative supply addition was 13.5 mn sq. ft. an interesting pattern. Except Hy in H1 2020, compared to 26.6 mn sq. ft. in H1 Mumbai, all other markets in the 5. Despite the damage, it still conveys, as of June Source Savills India Research 2019. COVID & lockdown phase remained 2020, a hope for V-shaped recovery, as has dependent on three core sectors, abundantly been evidenced. H1 2019 vs H1 2020 namely, BFSI (Banking Financial Demand Sectors in H1 2020 Services & Insurance), Technology Quarterly World GDP H1 2019 H1 2020 YOY Decline and Manufacturing. While this BFSI IT Manufacturing Co-working Others (2019:Q1 = 100) pattern may change during the second half, if the pandemic led 100% World 35 -5% crisis persists, India’s focus on its Advanced Economies -57.66% -49.39% 75% 30 traditional sectors may need to Emerging market and developing economies -15% excluding China increase, necessitating vital policy 25 50%

ft.) -25% China initiatives as well. 20 -35% This section has presented a top- 25% 115 15 (mn sq. -45% (Decline %) level summary of office markets’ 110 10 -55% performance on the national scale. 0% Further details on absorption, e 5 -65% NCR abad Pune 105 stock and supply, rentals, vacancies, Mumbai Chennai der Bangalor 0 -75% sectoral splits, etc. are provided in Hy Absorption Supply 100 each citys section. Source Savills India Research

95 Core Demand Sectors in H1 2020

90 100% 85 Co-working & Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Others 75% 2019 2020 2021

50% Source IMF staff estimates BFSI, IT & Manufacturing 25%

0% e NCR abad Pune Mumbai Chennai der Bangalor Hy Source Savills India Research savills.in 2 3 Mumbai Market Watch - Office - H1 2020

H1-2020: Absorption demand split sector wise 21% 19% BFSI IT 14% 3% Co-Working Healthcare 5% 2% Consulting Manufacturing & Research 36% Others Source Savills India Research

Mumbai IMPACT OF COVID-19 AND OVERALL OUTLOOK Leasing activity and additional supply has been affected by the COVID-19 pandemic. Many transactions were deferred by 3-6 months as businesses took a hit, on account of stringent lockdown. Many companies have put their expansion MUMBAI COMMERCIAL of the additional supply creation, and plans on hold. We expect gradual recovery in fresh Mumbai Absorption, Additional Stock and Vacancy, at the end of H1 2020, the total stock Q1/2019 to Q2/2020 OVERVIEW leasing activity for the rest of the year. Infact, the stood at around 125 mn sq.ft for MMR. overall recovery of commercial office market is Absorption Supply Vacancy level Demand: Commencement of Unlock 1.0 & 2.0 expected to be highly contingent on how businesses The office market of Mumbai indicates a revival of sorts, though react to the ever-evolving and dynamic COVID-19 3.0 14.0 Metropolitan Region (MMR) has been putting a number to it still remains situation. In the near term the tenants focus is 13.8 performing well since the last 5 years. 2.5 difficult. expected to be clearly on cost optimization and 13.6 2019 particularly witnessed strong creation of safe and secure workplaces. Demand ft.) Vacancy, Rentals and Segmental 2.0 leasing activity with transactions of 13.4 Demand: generated by the healthcare segment is expected to over 6.9 mn sq.ft taking place. The remain favourable in the medium term. 1.5 13.2 Vacancy levels have been around 13% in

(%) (mn. sq. momentum continued into 2020; with 13.0 H1 2020. Despite a drop in the leasing 1.0 space take up remaining buoyant till 12.8 activity, the weighted average rental Key Office Transactions, H1-2020 0.5 the nation-wide lockdown towards the 12.6 grew by 2% YoY in H1 2020. We do not end of Q1- 2020. As MMR remained - 12.4 anticipate an increase in rents in the Building Tenant Micro-market Sq ft* under lockdown for an extensive period 2019 2019 2019 2019 2020 2020 next few quarters due to the economic 180,000 Q1 Q2 Q3 Q4 Q1 in response to the COVID-19 outbreak, Lodha i-Think - Tower A Deloitte Shared Services India Limited Liability Partnership PBD - Q2 and demand uncertainty. As far as the office leasing stood at 2.8 mn sq. ft. in Source Savills India Research sectoral demand is concerned, Financial 140,000 the H1 2020, a decline of nearly 24% Akruti Business Port HDFC Bank Limited SBD - North Central Mumbai Services and Technology segments YoY. Micromarkets like PBD – North Rental Trends - Micro market Wise, Q1/2019 were the biggest contributors -21% and Prism Tower A (Mindspace) Tech Mahindra Business Services Limited PBD - North Mumbai 120,000 Mumbai accounted for nearly 40% of the to Q2/2020 19% respectively. Co-working operators leasing activity, followed by New CBD Prism B (Mindspace) Tech Mahindra Business Services Limited PBD - North Mumbai 120,000 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 accounted for 14% of the market activity – BKC and SBD – with in H1 2020. We foresee reduction in 110,000 ) 350 15% and 12% share respectively. 247 Park Future Retail Limited SBD- Eastern Suburbs 300 fresh leasing activity by co-working 250 Supply: operators in the near term. Source Savills India Research 200 As supply chain disruptions and MUMBAI MICROMARKETS:

ft./Month 150 labour issues became real bottlenecks Old CBD () - , , Ballard Estate, and Churchgate

Sq. 100 in construction related activities for New CBD (BKC) - G Block and Other than G Block SBD - I (SBD - South Central Mumbai) – Mahalaxmi, Worli, Lower , Prabhadevi, Dadar West, Dadar East and Parel INR/ 50 ( most of April, May and June 2020, SBD - II (SBD - BKC Periphery) – E, Bandra W, Kalina, Vakola, Khar E, Khar W, , Santacruz E and Santacruz W 0 incremental office stock creation was SBD - III (SBD North Central Mumbai) – E, Vile Parle W, Andheri E, Andheri W, Jogeshwari E Jogeshwari W, Goregaon E and Goregaon W hane MumbaiMumbai Mumbai MumbaiSuburbs Mumbai negligible. H1-2020 witnessed 0.8 mn SBD - IV (SBD – Eastern Suburbs) – Sion, Chembur, Ghatkopar, Mulund, Kanjurmarg, Powai and Vikhroli CBD-BKC al Peripheryal w ern PBD-T PBD – I (North Mumbai) - Malad East, Malad W, Kandivali E, Kandivali W, Borivali E and Borival W Ne South Centr Centr NorthEast sq.ft of additional stock creation- a Source: Savills Research SBD-BKC PBD-Navi PBD – II (Thane) – Thane CBD- South North PBD- SBD- declineof 70% YoY. Micromarkets like Old PBD – III (Navi Mumabi) – Airoli, Vashi, CBD Belapur, Mahape and Turbhe SBD- SBD- Navi Mumbai, PBD – North Mumbai and SBD – Eastern Suburbs saw bulk Source Savills India Research *Approximate and indicative area only

savills.in 4 5 Savills Savills India Savills in India is a full-service advisor offering Savills plc is a global real estate services provider Savills is India’s premier professional international Commercial Advisory & Transactions, Project listed on the London Stock Exchange. We have an property consulting firm. Savills began its India Management, Capital Markets, Valuations & international network of more than 600 offices and operations in early 2016 and has since seen Professional Services, Research & Consulting, 39,000 associates throughout the Americas, the significant growth. With offices in Bengaluru, Industrial & Logistics and Residential services. UK, continental Europe, Asia Pacific, Africa and Mumbai, Delhi NCR, Chennai, Pune and The blend of in-depth, sector specific knowledge the Middle East, offering a broad range of specialist Hyderabad; and also having serviced clients in with entrepreneurial spirit gives clients access to advisory, management and transactional services Kolkata, Chandigarh, Guwahati, Bhubaneswar, unique and innovative real estate solutions backed to clients all over the world. Vadodara and Indore, Savills India has a strong up by the highest quality of service delivery. pan-India platform to deliver to our clients.

Research Central Management Regional Management Arvind Nandan Anurag Mathur Bhavin Thakker Managing Director Chief Executive Officer Managing Director - Mumbai Research & Consulting Savills India Head - Cross Border Tenant Advisory [email protected] [email protected] [email protected] Dipali Gandhi Kaustuv Roy Sarita Hunt Director Managing Director Managing Director Terms & Acronyms Research & Consulting Business Solutions Bangalore [email protected] [email protected] [email protected] Suryaneel Das Naveen Nandwani Shweta Sawhney Recovery Shapes Senior Manager Managing Director Managing Director Harvard Business Review suggested various possible recoveries from the Corona crisis. Three of those are commonly used, namely V, U & L Research & Consulting Commercial Advisory & Transactions Delhi NCR shapes. V-Shaped is a strong recovery after the debacle, U-shaped is a slower and long-drawn recovery, while an L-shaped aftermath is where the [email protected] [email protected] [email protected] previous peak is not recovered. Abhinav Pal Praveen Apte BFSI Assistant Manager Managing Director Research & Consulting Pune Banking, Financial Services and Insurance [email protected] [email protected] DELHI NCR Anup Vasanth National Capital Region. For our report purposes, we include New Delhi, NOIDA & Gurgaon (however, in general parlance it is meant to include Media Queries Managing Director several others like Ghaziabad, Dwarka, Faridabad, etc.) Nitin Bahl Chennai Director [email protected] BKC Marketing, Sales and Strategy Sesha Sai Bandra Kurla Complex, now the established main business district of Mumbai, supplanting the erstwhile Central Business District of Nariman [email protected] Managing Director Point Hyderabad [email protected]

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