Demand for office space in Hyderabad to remain subdued in short-term: CBRE

Business Line, May 2,2014. 

The demand for office space is projected to be subdued in the metropolitan area of Hyderabad but relatively buoyant in the IT hubs and corridors, according to real estate consultancy CBRE.

Anshuman Magazine, Chairman and Managing Director of CBRE South Asia, in his analysis states that the demand for office space in Hyderabad is likely to remain subdued in the short-term as corporate occupiers are expected to maintain a cautious outlook amid an uncertain economic and political environment.

Commercial leasing

The IT and extended IT corridor are likely to remain the most active micro-markets for commercial leasing activity in the city. From a supply perspective, around 2.8 million sq. ft. of IT/IT SEZ supply is likely to reach completion in these micro-markets by the first half of 2014.

This significant supply pipeline, coupled with subdued demand levels, is likely to push up vacancy rates, keeping rental values range-bound in the short to medium term.

During 2013, the commercial office market of Hyderabad witnessed leasing activity of 3 million sq. ft., primarily driven by corporate occupiers from the IT/ITeS sector.

The western micro-markets of the IT corridor (Madhapur, Kondapur, HITEC City and Gachibowli) and the extended IT corridor (Raidurg, Manikonda, and Nanakramguda) remained the most active commercial hubs.

IT corridor

The IT corridor continued to attract greater interest from corporate clients in the first quarter of 2014, with significant under-construction developments being pre-committed for space take-up by corporate clients at Madhapur and Kondapur.

While rentals remained stable in the commercial and IT office space segments of this micro-market, it appreciated marginally by 2-3 per cent for select IT SEZs on a quarter-on-quarter (q-o-q) basis. Rentals in the micro-market remained stable.

In the first quarter of 2014, the central business district of Begumpet, Punjagutta, Somajiguda and parts of Banjara Hills saw sluggish office space transactions.

Rental values and vacancy rates remained stable because of limited demand and the absence of any fresh space addition.

Peripheral areas of Shamshabad, Uppal and Pocharam saw sluggish leasing activity during Q1 2014.