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Real Estate: Hyderabad now India’s top commercial realty market

Gross office space demand was highest in city for Q3 2021

Real Estate: Hyderabad now India’s top commercial realty market
According to Colliers, after an average performance in Q2 2021, Hyderabad emerged as one of the most resilient cities in terms of demand-supply dynamics.

In a first, Hyderabad surpassed Bengaluru as India’s top commercial real estate (CRE) destination in terms of gross office space demand during the July-September quarter this calendar year, as occupiers focused on large block deals, especially from the BFSI segment and flexible workplace operators.

According to Colliers, after an average performance in Q2 2021, Hyderabad emerged as one of the most resilient cities in terms of demand-supply dynamics.

For the first time, Hyderabad had the maximum share in leasing volume at 2.5 million sq ft (MSF), surpassing Bengaluru. However, on a year-to-date (YTD) basis, India’s silicon valley is still the market leader.

Overall, the top six cities of India reported around 10.3 MSF of office gross absorption in Q3 2021, the highest volume recorded since Q1 2020. IT-ITeS driven cities of Hyderabad, Bengaluru and Pune accounted for 62% of the gross absorption in Q3 2021.

Colliers managing director for office services (south India) Arpit Mehrotra told FE that growth in Asia is driven by cities as much as countries. Bengaluru and Hyderabad should be Asia’s fastest and third fastest-growing cities, respectively, over 2022-24. While Bengaluru has always been the blue-eyed boy of CRE, Hyderabad has shown a tremendous amount of potential and has grown by leaps and bounds, especially in the last decade.

“A renewed and planned focus on the city’s infrastructure, availability of talent, relatively better costs, proactive state government and favourable state policies have contributed to Hyderabad’s CRE growth story.

The state aims at making multiple integrated projects across the city to keep improving its real estate momentum. In the past few years, technology giants like Apple, Google, Facebook and Amazon have entered this market resulting in tremendous economic development,” he added.

In the Hyderabad market, BFSI and flexible workplace sectors took the maximum share in leasing accounting for 66% of the total demand.

The micro market of Rai Durg saw the maximum leasing traction accounting for 53% of the total demand, while Hitec City contributed 40%.
Hyderabad was also the top market in terms of office space supply during Q3 2021. The quarter saw the highest supply since Q2 2020 at 10.8 MSF in Q3 2021 with Hyderabad and Pune contributing the maximum share at 29% and 25%, respectively.

Going ahead, Mehrotra said that despite the ongoing pandemic, Hyderabad has shown its resilience and is poised for a growth recovery in the near future. “Although vacancy levels showcased an upward trend last quarter, we do not expect a further increase in the vacancy number by end of 2021 given most of the new upcoming supply being is pre-committed,” he added.

“The said vacancy may put some pressure on rentals in the short run; however, we are witnessing multiple enquires for upcoming Grade A projects by occupiers evaluating their real estate strategy,” he noted.

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