It's because of the Material Design, which is originally created for mobile touch devices where a large amount of spacing is required to ensure reliable interaction, then Google decided to use MD on desktop Chrome as well to make Chrome UI identical as much as possible on all platforms. In pursuit of this goal something had to be sacrificed and unfortunately Google Chrome designers decided it has to be the usability on desktop platforms. Probably because the mobile usage trend is increasing or because mobile devices provide the most of Google's ad revenue. You can use an extension or a fork of chromium that provides an alternative UI for bookmark manager.

Really? That's a bad decision IMHO... It looked like a rendering error.
It's a bad idea to try and make all platforms look the same; I've seen some other sites alter to a mobile-on-laptop look like this then revert when customers complain or bail.  
Well, the simple solution is back to Firefox I guess! A shame.

Could some one from Material Design team look into this issue.

Thanks.

Attaching screenshots of Old Bookmark manger and New material design Bookmark Manager.New material design does indeed looks double spaced when compared to earlier. Could some one from Material Design team please look into this issue and provide inputs.

Thanks..!!

Deleted: OldBookmarkManager.png 120 KB

	OldBookmarkManager.png 120 KB View Download

Deleted: MaterialDesignBookmarkManager.png 109 KB

	MaterialDesignBookmarkManager.png 109 KB View Download

Thanks for the feedback, we've increased the row size from 22px to 40px as part of our work for MD Bookmarks. 40px is a fairly standard size for material design applications.

I understand that, though, that this decreases the number of visible items, especially on a laptop screen. This is especially relevant for the bookmark manager, which is a power-user focused UI.

+ a couple of people who should see the feedback.

"Material Design" seems to be a way of saying "bad design". Or, that people are abandoning the laptop / desktop user, and failing to make designs that size appropriately for the device in use - which was good design until the recent fashion change. And this sort of design is just fashion - it comes and goes. Fortunately other browsers are less shortsighted...

Thank you for the feedback. The spacing is something we've already tweaked from the Material Design spec [1] to improve it for desktop, and we will revisit if we see users having issues. However, we have not seeing any significant issues with similar changes to History/Settings/Downloads (which are more frequently used pages), and we want to maintain a consistent feel across all of the chrome:// pages.

[1] https://material.io/guidelines/components/lists.html#lists-specs

I'm surprised if settings and downloads are used more than bookmarks! That would be odd. Settings is rather borked layout wise too, but really you only use it once when setting up a new instance of Chrome, hardly ever afterwards. I use 3rd part for history as the search doesn't work well, but it's layout is better than bookmarks - much less unused space.
Downloads page - I've never had a reason to look at that! I know where downloads go, and the status at bottom of page tells me it's done. I'm amazed again if that's used more than bookmarks.
Some of the current android layouts are too wide spaced as well, requiring unnecessary scrolls...    

MD looks like a dumbed down design to me, certainly it's less efficient.
How about allowing an option for those of us that prioritise efficient working over MD? Or providing the old, better, bookmark manager as an extension?