Ahmedabad post-COVID could be the future of India’s Office Real Estate market

The current lockdown has brought the Real Estate industry to a standstill position and the recovery curve will depend on the fiscal stimulus rolled out by the government.

We would like to give a brief about the current scenario of the Ahmedabad Commercial Office Market:

• Ahmedabad’s Commercial Real Estate Market has seen an upward trend in the past one year in terms of new supply & leasing. New completions in 2019 far outpaced the leasing activity at an approximately Five million sq.ft. of Grade A & B spaces, wherein the net absorption during this period was around 2.35 million sq.ft. Other than this by the end of 2020, we expect an additional two and a half to three million sq.ft. Commercial space to hit the market.
• Availability of quality spaces at cheaper rentals is the main focus that would drive other companies all over India to set their base in Ahmedabad as presently the current rentals for good quality premises are fluctuating at Rs. 43/- per sq.ft per month.
• The leasing activities in Ahmedabad are dominated in the micro markets situated at SG Highway, Vastrapur, Corporate Road & surrounding locations. The micro-markets located at Sindhubhavan Road, Abmli Bopal Road, Rajpath Rangoli Road & Thaltej-Shilaj Road have a promising future to come as they have new age buildings with all the cutting edge facilities.
• Ahmedabad has a strong presence of some of the major pharmaceutical companies of India, naming a few Zydus, Cadila, Torrent, etc. and this would drive other pharma companies from different parts of the country to plan their expansion here keeping in mind the availability of good space at fairly decent rentals comparing other cities.

If we look at the previous crisis of 2008 the Ahmedabad commercial real estate market had leasing activities of around 0.3 mn sq.ft. which was quite less than the trending market at that time, the recovery for which took around 6-8 months

Based on our assumptions this is what we conclude would be the scenario of the Commercial office space market in Ahmedabad post-COVID

• The majority of the occupiers/tenants will either re-negotiate their current lease agreements or will move to a smaller space due to the reshuffling of the employee strength.
• Rental of small office sizes of 1000 to 5000 sq.ft. in Grade A buildings would continue to remain stagnant and there would be continuous takers for smaller units. Availability of large size floor plates of 10,000 to 50,000 sq.ft. of Grade A buildings is also a challenge and this would enable the rentals to remain stagnant.
• Local Co-working operators have been leasing large floor plates at fairly decent rentals. The present situation would enable Pan India Co-working operators to look at Ahemdabad as a base for their expansion plans keeping in mind the low rentals and the easy availability of Grade A buildings, as most of the tenants would not want to invest in CAPEX and also they would have the flexibility of expanding/ downsizing depending upon the situations.

Our understanding is that the way forward looks very positive for Ahmedabad and we foresee to come out of the pandemic and make a mark in our country.

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