Hyderabad plays catch-up with Bangalore

Hyderabad plays catch-up with Bangalore
Jul 2019 , by , in Latest News, News/Views

Total gross leasing activity was recorded at 13.2 million sq feet during the second quarter of 2019, rising 10% from the corresponding quarter last year. Technology, BFSI (banking, financial services and insurance) and flexible workspace operators continue their expansionary mode, which was supported by the quality supply infusion in Q2, which rose 67% year-on-year to 10.3 million sq feet.

“Bengaluru maintains the top position in office space leasing, driven by the technology and manufacturing occupiers which had a share of 32% and 18% respectively. While flexible workspace operators’ leasing was subdued during the quarter, operators are ramping up aggressively and this year is likely to see robust leasing by flexible workspace operators in the city. Occupiers are preleasing space, and even taking-up space in refurbished grade B buildings, due to tight vacancies amidst healthy demand” said Ritesh Sachdev, Head, Occupier Services, India and Managing Director, South India at Colliers International.

On a half yearly basis, gross absorption touched 24.5 million sq feet, inching up marginally by 2% compared to same period last year.

“The leasing activity has risen by 17% compared to previous quarter indicating positive business sentiment as a result of re-election of the NDA government. During the second quarter, tech and IT-BPM companies continued the strong streak, accounting for 35% share. This was followed by the engineering and manufacturing sector and BFSI sectors with a share of 12% each. During the quarter, flexible workspace accounted for only 11% of the leasing. However, they are expected to ramp up, preleasing space for the future.”, says Megha Maan, Senior Associate Director, Research at Colliers International India.

Robust expansion lifts fresh take-up of space

Net absorption or fresh take-up of space amounted to 11.5 million sq feet, accounting for a massive 87% of total leasing activity during Q2. Occupiers remain bullish about the business environment in the country, as they continue to expand at a robust pace. On a quarter-on-quarter comparison, net absorption increased by 10%.

In terms of net absorption, Bengaluru accounted for the highest share in leasing at 28% during Q2, followed by Hyderabad and Delhi-NCR, which had a share of 24% and 18% respectively.

In Hyderabad, expansionary mode of technology and flexible workspace operators was well supported by 3.5 million sq feet of supply during the quarter. Occupiers continue to pre-lease space in Hyderabad, as vacancies remain tight in preferred submarkets in the city. Vacancy in the city is recorded at 5.5% at the end of Q2 2019. In fact, more than 15 new companies entered the Hyderabad market in first half of 2019, from sectors such as tech, flexi spaces and pharma.

In Q2 2019, Delhi-NCR saw notable increase of 63% in net absorption driven by tech (22%), healthcare & pharma (15%) and flexi space operators (12%). Noida is seeing rising occupier interest with a 38% share in gross leasing in Q2 2019; and an 11% increase in gross leasing compared to Q1 2018.

New supply:

The first half saw 23.2 million sq feet of new completions, 51% higher compared to H1 2018 led by cities namely Hyderabad and Bengaluru, that together contributed 72% to total supply.

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