HYDERABAD’S SUCCESSFUL SURGE
Hyderabad displaces Bengaluru as the fastest emerging dominant market in office space leasing
TEXT: SREYASI MAITY
T here is no looking back for Hyderabad as it knocks out Bengaluru to dominate the office property market space. This is due to several precommitments. In the first quarter of 2019, gross leasing touched 12.8 million sqft, recording a growth of 3 per cent on a quarterly basis with Hyderabad, Bangalore, Mumbai and Delhi-NCR accounting for more than 75 per cent of the leasing activity, showed data from CBRE South Asia. In the first quarter, Hyderabad witnessed leasing of 3.5 million sqft against 1.1 millon sqft a year ago, while leasing in Bengaluru declined to 2.5 million sqft from 5.5 million sqft.
SMALL IS BIG
Small sized deals with less than 10,000 sqft and medium-sized transactions ranging between 10,000 sqft and 50,000 sqft dominated space take up accounted for 33 per cent and 48 per cent of the transaction activity respectively. The share of large-sized deals greater than 1 lakh sqft increased from 7 per cent in fourth quarter of 2018 to 10 per cent during this quarter. Hyderabad followed by Bengaluru, dominated large-sized deal closures in the first quarter of 2019, while a few such deals were also reported in Mumbai, Noida and Chennai.
“Since the turn of the millennium, Hyderabad has been a popular commercial real estate destination. Driven by the IT/ITeS surge in India, companies including IBM, Google, Amazon, Microsoft and Apple have set up offices in the city. Low rent, ample availability of quality real estate and the presence of a massive talent pool make Hyderabad one of the most attractive destinations for the IT/ITeS sector in India. The Telangana government has invested heavily in the city’s infrastructure facilities and connectivity, which improve the overall real estate climate and ease of doing business in the city,” said Rakesh Reddy, Director, Aparna Constructions.
Commercial real estate in Bengaluru has doubled in the past decade and at present, the city accounts for approximately 25 per cent of India’s total Grade-A commercial real estate inventory. While Bengaluru’s commercial real estate challenges include unplanned urbanisation and stressed infrastructure, a significant challenge to Hyderabad’s growth is consistently attracting comparable talent. Approximately 70 per cent of the talent pool in Hyderabad is migratory.
Tech corporates and flexible space operators mainly dominated large-scale deal closures. A few large-sized deals were also closed by e-commerce, BFSI, engineering and manufacturing and research, consulting and analysis companies. Shivam Sinha, CoFounder and CEO of Indiassetz, however expressed, “Bengaluru continues to offer more every passing year in terms of business opportunities, talent availability, socio-cultures flexibility; thus holding a promise as no other city does. With the expansion now having set in around the periphery of the city, I only see more and more companies choosing Bengaluru as their preferred city for setting shops.” He also added, “Hyderabad has done everything right to fuel growth and thus continues to attract commercial investments.”
Since Hyderabad has only recently transformed into a global commercial hub, the potential for growth is immense. While Bengaluru has been the leader in commercial infrastructure development, Hyderabad has been growing fast as a competitor. In fact, Hyderabad overtook Bengaluru to lead in total office leasing in the first quarter of 2019.
Hyderabad noted that the highest increase in rental values at 8 per cent followed by Bengaluru, with 5 per cent rise. Hyderabad is also expected to add 33 million sqft of commercial office space by 2021, increasing its stock by 60 per cent, compared to approximately 23 million sqft of new office space supply in Bengaluru. Hyderabad’s residential real estate market is also witnessing considerably higher demand across all segments, as compared to other major cities in India.