Hyderabad, 12 February, 2019 – 2018 witnessed gross absorption of 6.8 million sq ft, the highest in the last eight years; this outcome reflected heightened leasing activity by IT-ITeS occupiers. Large transactions (deals greater than 1.0 million sq ft) constituted 63% of leasing activity during the year. The IT-ITeS sector continued to be the dominant demand driver, accounting for 87% of transactions, followed by flexible workplace operators on 10%. The endeavour to push the state’s gaming and animation industry also contributed to rising demand from technology companies, among other initiatives to attract occupiers.
We expect office market to witness strong demand from IT-ITeS occupiers over the next couple of years. The strong pipeline suggests that developers are capitalizing buoyant demand”, says Arpit Mehrotra, Senior Director, Office Services (Bengaluru & Hyderabad) at Colliers International India.
Although the number of deals transacted in 2018 declined YoY, large size deals pushed the average deal size to almost double to 64,400 sq ft. This indicates rising business confidence of technology occupiers as the city offers requisite talent pool, infrastructure and facilities. We expect the occupier demand to remain strong, supported by the upcoming supply over the next three years. The steady demand in the SBD micromarket to push rents up 10% by the end of 2019.
In Q4 2018, Hyderabad witnessed new Grade A supply of about 1.4 million sq ft, totaling 4.3 million sq ft for 2018. We forecast new Grade A office completions of 38.4 million sq ft over 2019-21. More than 90% of the upcoming supply is concentrated in the SBD micromarket, a market that has attracted occupiers owing to high connectivity and large quality developments. As a result, rental values in the SBD appreciated by 8% over 2018 despite the infusion of new supply. We advise developers to adhere to their construction schedules to cater to the steady demand.
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