BENGALURU | MUMBAI | NEW DELHI: The worldwide spread of the coronavirus is expected to delay commercial real estate deals across India due to travel restrictions and lack of clarity on its impact on global economic growth.
Commercial space deals in India were earlier estimated to remain robust in 2020 after hitting a record of over 60 million sq. ft. in 2019. However, deals could be pushed back by three to six months as key decision makers may not visit India in the backdrop of travel restrictions, according to transaction advisors.
A final assessment of the impact of the coronavirus epidemic on the global economy may lead to changes in expansion plans and therefore space requirements.
“It is a Black Swan event that comes with implications for the world economy. The disruption to business cycles is bound to impact commercial real estate decision-making as well,” said Gautam Saraf, managing director at Cushman & Wakefield in Mumbai.
Demand remains intact, although decision-making for corporate real estate could face delays due to travel restrictions and as businesses scramble to cope with the larger economic impact, he said. Saraf expects delays of 2-3 quarters in decision making that could defer office space transactions.
Sustained robust demand for office space had pushed leasing activity across the country in 2019 to a record. Demand was expected to remain strong this year, too, with occupiers preferring to pre-lease commercial real estate to future-proof their portfolios and hedge against rental escalations. The Indian office market has been setting new benchmarks in an otherwise gloomy economic climate. The pre-leasing of office space grew threefold to 18.4 million sq. ft. from 5.64 million sq. ft. in 2016, according to data from Jones Lang LaSalle India. “There will be some impact of coronavirus on commercial leasing for sure. Decisions will get delayed for some time, which means if a company was taking some space in March, they will postpone it for few months to see the impact of disruption due to the virus,” said Anshuman Magazine, chairman for India, South East Asia, Middle East and Africa at CBRE. At least three large deals involving over 500,000 sq. ft. each in Bengaluru and Mumbai, which were expected to be concluded by March end, have been deferred as occupiers sought time to assess the impact of the epidemic. “It’s a global scare and one is not so clear of its implications on the business yet. Occupiers are seeking more time before they get into any long-term commitment for space,” said a Mumbai-based real estate developer negotiating one of these large deals. Apart from deferring large space lease commitments, many companies are considering utilising co-working centres to tide over their immediate requirements until the scenario gets clear.
March 12, 2020
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