Hyderabad sees highest pre-commitment in office space
Of the total 37.6 million sq ft of pre-commitment in the Grade A office space across India, the city saw a pre-commitment of 10.3 million sq ft
Hyderabad: Hyderabad’s pre-commitment activity in 2020 stood at 80 per cent of the Grade A office supply and the office market continues to witness the highest pre-commitment levels, with more than half of the expected supply in 2021 already pre-committed. The other southern market of Bengaluru follows Hyderabad in pre-commitment activity.
Of the total 37.6 million sq ft of pre-commitment in the Grade A office space across the country in 2021, Hyderabad has witnessed a pre-commitment of 10.3 million sq ft, followed by New Delhi and Bengaluru with 7.8 million sq ft and 6.6 million sq ft, respectively, according to JLL.
Low vacancy submarkets account for the majority of the pre-commitment in Hyderabad and it is the same trend across all top markets of the country. Gachibowli which saw 14.6 per cent vacancy in December 2020 witnessed 59 per cent commitment for 2021 already while HITEC City with seven per cent vacancy in December 2020 has seen 42 per cent pre-commitment for 2021.
The strong pre-commitment is testimony to the sustained importance of office real estate in corporate occupiers’ business plan. Large companies find it viable to pre-commit spaces for future requirements. It gives them an opportunity to negotiate flexible lease terms and cover future risk against market rental escalations. The pre-commitment activity is being driven by IT-ITeS occupiers who require larger floor plates and pre-commitment becomes a necessity in markets with limited availability of Grade A office spaces.
Continued momentum
This week also saw Ascendas Property Fund Trustee, trustee-manager of Ascendas India Trust, entering into definitive agreements for the acquisition of an IT SEZ building aVance 6 at HITEC City, Hyderabad for Rs 506 crore, which shows the demand for the office space market. In another deal, the US MNC Qualcomm has reportedly entered into an agreement to lease over 1.6 million sq ft of commercial space in K Raheja Corp’s IT park in Hyderabad.
DevX, a managed office space provider has forayed into Hyderabad with a 700-seater facility. Located in Hi-Tech city, the centre is spread across 50,000 sq feet and the company wants to further augment this with additional three lakh sq feet in next one year.
Parth Shah, co-founder, DevX said, “As global companies strive to set up offshore development centres, we stand poised to offer them best-in-class, world-standard managed spaces with excellent amenities. HITEC City is already home to many global giants and we hope to further add to this, being ready to offer spaces for setting up Global Capability Centres.
Nationally, the office market witnessed green shoots of recovery in the third quarter as net absorption increased by 63 per cent quarter-on-quarter. Sentiments improved further in the last quarter of 2020 with the news of potential vaccine development and the office market continuing its recovery. Year 2021 is expected to witness completion of 37.6 million square feet of Grade A office space, 32 per cent of which has already been pre-committed. Net absorption is likely to hover around the 30 million square feet mark.
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