Bengaluru registers home sales of 11,402 units in H2 2020; increases by 32% QoQ in Q4 2020: Knight Frank India

Office leasing highest in India at 7.54 mn sq ft in H2 2020; Q4 2020 surpasses the cumulative performance of first three quarters of 2020

Large corporates bolster office transaction activity in H2 2020, city witnesses 61% YoY increase in the average deal size

 Bengaluru registers home sales of 11,402 units in H2 2020; increases by 32% QoQ in Q4 2020: Knight Frank India

Unsold inventory down 5% YoY to 74,764 housing units during 2020

Bengaluru, January 6, 2020: Knight Frank India today launched the 14^th edition of its flagship half-yearly report – India Real Estate: H2 2020 – which presents a comprehensive analysis of the office and residential market performance across eight major cities for the July-December 2020 (H2 2020) period. The report cited that in 2020, Bengaluru retained its premier position as the city registering highest office leasing volume in the country. The city recorded office leasing of 0.70 mn sq m (7.54 mn sq ft) which accounted for 34% of the overall volumes across the eight markets in India. Standalone, Q4 2020 recorded 6.4 mn sq ft of gross transactions, which was far ahead against 1.15 mn sq ft in Q3 2020. The quarter also surpassed the cumulative performance of the first three quarters of 2020. In terms of new office completions, the city registered 5.42 mn sq ft of supply in H2 2020.

The city reported an exponential increase in the average deal size by 61% from 56,503 sq ft in H2 2019 to 90,890 sq ft in H2 2020. With regards to the sectoral profile, the manufacturing industry doubled its demand share to 25% in H2 2020 compared to 12% in H2 2019. In terms of micro-market performance, Peripheral Business District – South (Electronic City and Bannerghatta Road) recorded a phenomenal growth of 347% YoY to 1.87 mn sq ft under office leasing in H2 2020.

The residential market of Bengaluru recorded home sales of 11,402 units in H2 2020 whereas new launches recorded 9,123 units during the same period. The year 2020 started on a high note with Q1 2020, achieving 72% housing unit sales of the 2019 quarterly average. However, sales dipped in Q2 2020 as lockdowns and COVID-19 induced market uncertainties stalled business activity in Bengaluru. Sales revived marginally in Q3 2020 on account of the pent-up demand and the new demand set in motion as lockdown relaxations restored business activities. The Q4 2020 sales numbers scaled increased 32% QoQ and achieved 54% levels of the 2019 quarterly average.

The share of the above INR 5 mn ticket size category, home sales remained stable in H2 2020 to 65% YoY. The residential property prices which were increasing in the beginning of 2020, have now softened a bit. However, with the underlying characteristics of the market and improved sales performance, the pricing power in the city has been maintained, the city recorded a marginal drop of 1% Y-o-Y in weighted average price during 2020.

OFFICE MARKET HIGHLIGHTS OF BENGALURU

 Source: Knight Frank Research

• In H2 2020, office leasing activity in Bengaluru was highest across the top 8 cities at 7.54 mn sq ft, registering an 8% YoY growth. The city noted 12.32 mn sq ft of gross leasing in 2020.
• ORR, comprising areas such as Hebbal, Marathahalli, Sarjapur Road, remained the most preferred office business district accounting for 3,71 mn sq ft of the total leasing volume in H2 2020.  PBD South market, comprising areas such as Electronic City, Bannerghatta Road, remained the second most preferred market accounting for 1.87 mn sq ft during the same period.
• Bengaluru’s office market registered an average deal size of 90,890 sq ft in H2 2020, denoting a rise of 61% YoY.
• With gradual relaxation of the lockdown in Q3 2020 and better preparedness for the prolonged coronavirus outbreak, businesses especially technology-driven enterprises made a strong comeback and actively began scouting for office spaces in line with their long-term business plans. As a result, transaction activity picked-up meaningfully in Q3 2020 as compared to the lockdown influenced previous quarter.
• Q4 2020 standalone registered a massive growth of 459% QoQ to 6.4 mn sq ft of gross transactions. The quarter turned out to be much better than the same quarter last year and surpassed the cumulative performance of Q1 (4.19 mn sq ft), Q2 (0.58 mn sq ft), and Q3 ( 1.15 mn sq ft) in 2020.
• The rent in the city which was escalating early this year softened in Q4 2020. The weighted average rent is lower by 4% QoQ in Q4 2020 and stable on an annual basis to INR 80/sq ft/month.
• Manufacturing sector dominated the gross leasing activity in H2 2019, accounting for a 25% share.
• Information Technology industry maintained its place as the top consumer of office space with a 42% demand share in H2 2020 against 51% in H2 2019.
• New office supply in the city in 2020 registered 9.42 mn sq ft new supply whereas in H2 2020 it recorded 5.42 mn sq ft YoY.

QUARTER SNAPSHOT

Source: Knight Frank Research

Shantanu Mazumder, Senior Branch Director, Bangalore, Knight Frank India said, “Bengaluru has always been a premier commercial market and a hotspot of capital investment in the country. The pre-committed activity remained strong with 2.47 mn sq ft of space being taken up in Q4 2020, including large deals by ANI Technologies, Google and Amazon. Developers ensured quick deal closures in Q4 2020. In particular Bengaluru has the benefit of existing low vacancies that will enable absorption of much of the upcoming supply. The city also has the advantage of relatively lower rentals than global markets, and a large talent pool should help in better than expected market revival as global economies move towards normalcy. Going forward, the city is expected to experience a rise in office rental values in 2021.”

RESIDENTIAL MARKET HIGHLIGHTS OF BENGALURU

Source: Knight Frank Research

• Bengaluru’s residential market recorded home sales of 11,402 units in H2 2020 and 23,576 units in the calendar year 2020. The city reported new launches of 9,123 home units in H2 2020 and 19,929 home units in 2020.
• South Bengaluru saw the highest quantum of homes sold in H2 2020 to 3,860 units followed by East Bengaluru with 3,750 units. South Bengaluru (Koramangala, Sarjapur Road, Jayanagar, JP Nagar, HSR Layout, Kanakapura Road, Bannerghatta Road) also registered maximum home launches to 3,740 units during the period.

• With consumer preference shifting towards ready to move houses, developers have restrained new project launches in this year and reoriented operational and financial bandwidth towards completion of ongoing projects. The recurring spate of sales compared to launches has affected a gradual decline in the city’s inventory level. On an annual basis, unsold inventory is down 5% to 74,764 housing units at the end of 2020.

• In 2020, the weighted average house price was recorded at INR 53,120/ sq m (INR 4,935/sq ft).

QUARTER SNAPSHOT

Source: Knight Frank Research

 Shantanu Mazumder, Senior Branch Director, Bangalore, Knight Frank India said, “While the pandemic and associated lockdown disturbances have left an impression on 2020 performance of Bengaluru residential market, the city made a meaningful return in Q4 with a 32% QoQ improvement in home sales. As a direct result of the pandemic related experiences, there is an improved consumer perception for owning bigger and better houses. In terms of income scales, the Information Technology sector largely maintained employees’ jobs and income compared to their pre-COVID level that lent further resilience to the city’s housing market during these uncertain times.”

 He further added, “Multi-decade low home loan interest rate and relatively affordable price dynamics in the Bengaluru market have helped the cause of demand revival even during COVID crisis. Going forward, as pandemic resolution brings normalcy, low home loan interest rate and relatively affordable price dynamics will ensure a strong housing market in Bengaluru.”