Despite Covid, Hyderabad sees surge in new office space in 2020

Hyderabad, Jan 6 Despite the supply challenges owing to the Covid-induced lockdowns and mass exodus of labour during 2020, Hyderabad's office market recorded second highest annual supply numbers in the country.

According to leading international property consultant Knight Frank, Hyderabad saw 8.7 million square feet of new office space entering the market during the year, which is much higher than the decadal average of 4.6 mn sq ft for a year.

Bengaluru stood first in the country with 12 mn sq feet office space during 2020.

Increased business activity amid the news of vaccines for Covid-19 and year-end closing led to office space transactions in Hyderabad witnessing 640 per cent growth during fourth quarter, the Knight Frank India report said.

Hyderabad's office leasing activity recorded 3.8 mn sq ft of transacted space in second half of 2020 whereas new completions stood at 4.9 mn sq ft during the same period.

With news of the vaccine coming in, companies have started securing their office space by implementing their lease plans. With increased business activity visible from Q3 2020 and the year-end closing have together contributed to the surge in Q4 2020 transactions volume, it said.

The share of Banking, Financial Services and Insurance (BFSI) sector in total transactions went up from 4 per cent in H2 2019 to 30 per cent in H2 2020, recording a significant 248 per cent YoY growth in the sector's office space absorption in H2 2020. This increase is a result of two large BFSI deals that together accounted for 0.1 1 mn sq ft of the total leasing activity in H2 2020.

The average deal size increased from 79,865 sq ft to 97,554 sq ft in H2 2020. Large transactions (50,000 sq ft or and above) accounted for 45 per cent of the total number of H2 2020 transactions causing the jump, indicating an increase in the average floorplate requirement of occupiers.

Suburban Business District (SBD) with its Hyderabad Information Technology and Engineering Consultancy (HITEC) City and the Hyderabad Knowledge City at Raidurg, continued its dominance with a sizeable 83 per cent demand share, the highest, in the total H2 2020 transactions pie. The second-highest share, i.e. 16 per cent, was accounted for by the Peripheral Business District (PBD)-West at Gachibowli.

West Hyderabad alone accounted for 99 per cent of the total H2 2020 transactions volume, which is indicative of the strong occupier preference for this location in the city.

The Telangana government's Growth in Dispersion (GRID) policy aims to diversify occupier interest across the city zones to maintain a developmental balance.

"Hyderabad office market saw a significant revival in Q4 2020. Despite pandemic impact, rentals remained resilient and office demand is now seeing a recalibration of size and design. With news of vaccine coming in, global companies have commenced execution of their lease plans. Managed-office operators are bridging the gap between developers and occupiers by offering bundled services which is likely to stimulate the office story further," said Samson Arthur, Branch Director-Hyderabad, Knight Frank India.

"The office segment got a booster with Goldman Sachs announcing its Hyderabad entry during Covid. With the presence of Amazon's Data Centre, inquiries in this segment also have increased. Going forward, new sectors such as the automotive and electric vehicles segments show great promise. Ease of doing business in Hyderabad enabled by progressive governance added to availability of land and presence of institutional developers is encouraging existing enterprises to grow. It is also the reason why city is attracting new investments."

On the residential real estate market in Hyderabad, the Knight Frank report cited that residential home sales were recorded at 5,260 units in H2 2020. In Q4 2020, sales jumped up by 127 per cent as compared to Q3 2020. Key contributors to the increase in residential demand in H2 2020, particularly Q4 2020, include the festive season promotions and the Covid-induced push for newer homes with better layout thereby accommodating the new requirements of work from home and digital learning arrangements for kids and working parents.

The share of less than Rs 5 million ticket size sales increased from 15 per cent in H2 2019 to 24 per cent in H2 2020. This increase is noteworthy as it indicates the growth of the affordable housing segment in a market where the buyer preference has always been stronger for the Rs 5-10 million segment.

Hyderabad's residential market launches stood at 8,404 home units in H2 2020 and 12,826 home units in the year 2020. The city recorded sales of 5,260 home units in H2 2020 and 10,042 home units in the year 2020.

New project launches took a significant hit in Q2 and Q3 2020, as they recorded only 42 per cent and 37 per cent launches respectively, of the 2019 quarterly average. By Q4 2020, with sales also picking up momentum, launches revived with full gusto. Launches grew by a stellar 481 per cent QoQ in Q4 2020 leading to a 4 per cent YoY growth in the total H2 2020 launches.

On the demand front, numbers have plummeted by a significant 38 per cent YoY in 2020 recording a decadal low in annual sales. Sales revived marginally in Q3 2020 on account of the pent-up demand and because of the new demand set in motion with restoration of business activities. Supported by festive season promotions, multi-decade low home loan interest rates, softer residential prices, and higher income savings, Q4 2020 sales grew by 127 per cent QoQ.

( With inputs from IANS )