Hyderabad: Hyderabad accounted for close to 12 per cent of office space transactions in India during the first half (H1) of 2020. Owing to the dominating IT industry, the services sector continued to drive office space take-up with 53 per cent share. Financial services, healthcare, flexi-space operators, consulting and research sectors were the other significant demand generators.
The H1 of 2020 witnessed leasing activity to the tune of 1.7 million sq ft. The current vacancy levels in Hyderabad are over 10 per cent. Weighted average rentals across micro-markets, riding on the demand momentum of 2019, are currently at a 5-10 per cent premium, compared to H1-2019.
Sesha Sai, MD, Hyderabad, Savills India, said, “The demand for office spaces for medium-term is expected to rebound faster than they have dropped. Hyderabad will be the biggest beneficiary when the tide turns, as companies will look for talent, enabling environment and good quality supply of real estate, all of which are available in the city.”
With the emergence of hub-and-spoke real estate strategies, the State government’s push to evenly spread the development across the city, hitherto under-developed markets will see an increased demand for space, he added.
Hyderabad, in 2019, had recorded historic leasing activity, registering close to 10 million sq ft of area in terms of office space transactions. As witnessed in major Indian cities, the first half of 2020 could not replicate the same leasing trend.
Supply & absorption trends
At the end of first half of 2020, the total office stock in the city stood at around 61 million sq ft. Hyderabad market has been subject to an oversupply of premium grade office buildings for the last few quarters, says Sesha Sai.
The Hyderabad market will slowly but steadily shift towards a tenant-driven market, from a landlord-driven market a few years ago when quality supply was limited. Landlords are expected to be increasingly flexible, especially with large occupiers in the post-pandemic phase.
Nationally, office absorption in six major cities stood at 13.7 million sq ft in H1 2020 as compared to 32 million sq ft in the corresponding months a year ago. Similarly, the supply addition was 13.5 million sq ft in H1 2020, compared to 26.6 million sq ft of H1 2019.
