– 3.3 million sq ft of additional supply likely in H2 2017; vacancy levels to be maintained at 8-9%: Colliers Research –
Commercial leasing in Hyderabad revived with about 1.6 million sq ft (149,000 sq m) of gross absorption in Q2 2017 versus just 0.51 million sq ft (47,000 sq m) gross leasing activity in Q1 2017. Regardless of the anxieties on lay-offs and automation in the technology sector, it continued to expand and accounted for 92% of overall office leasing in the city. Flexible office operators, such as Awfis, Workenstein and Spacion contributed about 4% of total absorption, while the other sectors like healthcare, banking and finance, consulting, power, e-commerce and legal shared the remaining 4%.
“Influx of new companies, increased net absorption, improved average transaction size, healthy demand pipeline, etc. are indicative of the positive outlook and preference for the city”, said Hari Prakash, Senior General Manager, Office Services, Colliers International India.
About 89% of total leasing volume in Q2 2017 was concentrated in the commercial hub of the city in the Secondary Business District (SBD) and the micromarket will continue to attract tenants with availability of quality Grade A supply. Service Now, JP Morgan and Awfis sealed deals in the range of 0.04 million sq ft (4,000 sq m) to 0.14 million sq ft (13,000 sq m) in the SBD buildings, primarily in Hitech city location. The Central Business District (CBD), Off-CBD and Peripheral Business District (PBD) micromarkets recorded 5%, 4% and 2% of the remaining share in gross leasing, respectively, with deals noted primarily in Ameerpet, Banjara Hills, Begumpet. Somajiguda and Uppal.
While new supply was very limited in preceding quarters, Q2 2017 witnessed completions of 2.13 million sq ft (198,000 sq m) of office supply concentrated in the SBD. This new supply is already being taken up, largely by tenants in the IT-ITeS sector, thereby shrinking the vacancy levels to as low as 3% for Grade A buildings in IT parks, whereas the city average remained at 8%. Moreover, the increasing green-certified buildings in the SBD micromarket are attracting attention, with such buildings enjoying higher occupancy rates. “By Q4 2017 an additional 3.3 million sq ft (307,000 sq m) of Grade A buildings are likely to reach completions, out of which 1.3 million (121,000 sq m) is already pre-committed. Thus, considering the prevailing market demand, the new buildings are set to be taken up by tenants much faster, with the overall city vacancy maintained at 8-9% in 2017”, saidSurabhi Arora, Senior Associate Director, Research, Colliers International India.
As per Colliers Research, Hyderabad benefits from a favourable political environment. Re-energised growth will widen the opportunities for start-ups and other sectors, including electronics, telecom, healthcare, e-commerce, defence and animation in the near future. Recent notable investments by major developers like RMZ Corp, Embassy, Phoenix and SalavpuriaSatva and financial arms like Piramal Finance Ltd offering INR450 crore (USD 69.7 million) for the SEZ developments in the city, highlight the keen interest of private equity players in Hyderabad’s property sector. The operations of metro rail from Miyapur to Hitech city by the middle of next year will further boost the city’s commercial market in the SBD.