Hyderabad: Hyderabad continues to maintain its momentum in office space growth, which consequently has also impacted the residential sector positively, in terms of both sales as well as maintaining a healthy price appreciation quarter-on-quarter, a sign of stability, despite the pandemic. The city is expected to witness new office stock addition of 15-16 million sq ft on an average for the period of 2021 to 2025.
The city-led India’s office supply with a 30 per cent share in the first half of 2020, while driving the country’s office absorption with an 18 per cent share during the same period. Hyderabad recorded 4.3 million sq ft of net absorption in the second half of 2020 with an overall vacancy at single digit (around eight per cent).
High absorption and lower vacancy levels make Hyderabad office market attractive for investors. More demand can be observed in pre-leased or near completion assets of Grade A developers in future. The city emerged as one of the leaders amidst the Covid-19 crisis and the resilience was driven by the confidence of doing business instilled by the Government of Telangana, according to Sandip Patnaik, managing director & head, Telangana and Andhra Pradesh, JLL.
The city administration capitalised on the lockdown period by expediting the existing infrastructure project works along with the commencement of new projects, emphasised Patnaik.
On the other hand, landlords considered the prevailing situation and became more accommodating to the demands of occupiers while providing increased rent-free periods, reduced rental escalation and fully furnished deals to occupiers, which reduces their net effective rental outgo.
Sentiments improved further in the last quarter of 2020 with the news of potential vaccine development, and the office market continued its recovery momentum. The year closed with the net absorption of 6.47 million sq ft.
The lifting of lockdown and travel restrictions is expected to help further revive real estate assets, improve income visibility and attract cross-border investments in the sector in 2021. Increasing demand from emerging sectors such as healthcare, e-commerce and data centres is expected to counterbalance any impact from other sectors.
The events of 2020 will increase the adoption of work from home practices this year, but these will only supplement the traditional way of working from office. Co-working spaces would continue to grow and absorb demand due to their flexibility and short-term solutions, he noted.
Metro rail completion is likely to push demand across premium business districts (PBD) West & East while the rentals are expected to remain stable for 2021 and gradually increase by 2022. Investment management funds such as Strata Prop & Property Share have made investments during Covid times in the city in pre-leased office assets with a ticket size of about Rs 100 crore.
While office space has shown consistent growth, the residential sector, too, has maintained its momentum. Hyderabad has shown the highest recovery in terms of sale of residential units in India. In 2020, Hyderabad achieved 62 per cent of total sales in 2019 with 17 per cent increase in the sale price HNIs (high net-worth individuals) and family offices of local corporates have shown interest towards the residential sector.
Patnaik added that Hyderabad dominated new launches, accounting for 39 per cent of the overall launches during Q4 2020 and has the lowest unsold inventory in the country. Demand and prices are expected to increase in the next 3-4 years especially in mid-segment (Rs 80 lakhs to Rs 1.2 crore).
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