IT corridor driving Hyderabad’s office leasing

Kokapet district likely to emerge as key realty destination, says Colliers Research.

By Author   |   Published: 25th Nov 2017   12:05 am Updated: 24th Nov 2017   9:38 pm

Hyderabad: Hitec City, Gachibowli and its adjoining areas in Hyderabad, located in the western quadrant of the city have been the most active office markets. Over the years, the Secondary Business District (SBD) micromarket comprising these locations, have enticed various IT companies, such as Microsoft, Oracle, Google, Dell, Infosys, Wipro, Amazon, etc. to set up their office spaces in Hyderabad. The advent of such technology giants coupled with the developments in and around the Hitec city triggered the growth of nearby localities such as Gachibowli, Madhapur, Nanakramguda, Raidurg, etc. simultaneously.

Driven by expansions of large scale technology companies in 2017, the Hyderabad office market has witnessed a gross absorption of 3.32 million sq ft (YTD September 2017). With 86 per cent share in YTD (Jan-Sep 2017) gross leasing volume, the SBD micromarket continues to be the preferred destination for such companies looking for vast talent pool from across the country and supports talent retention as well.  “Hitech city and Gachibowli IT corridor will continue to be the hotspot for hosting IT/ ITeS firms owing to ease of travel, well-developed social infrastructure, and upcoming grade A office buildings”, says Hari Prakash, senior GM, Office Services (Hyderabad), Colliers International India.

As per Colliers Research, proximity to SBD and increasing residential developments in Kokapet, the location is likely to be the next emerging destination to attract real estate investments in upcoming years. Well located at less than a 10-km radius from Hitec city, Kokapet has good connectivity via the Outer Ring Road, Narsingi and Nanakramguda.

Connectivity to Airport and recent announcement by the state government on plans to implement Mono Rail System along the IT corridor through this area should further drive the demand in this region. The surrounding SBD locations such as Hitec city, Financial District, Kondapur, Raidurg, Gachibowli, etc. are witnessing upcoming construction of about 25 million sq ft of office spaces that is likely to increase the total office stock in the city to about 45 per cent by 2020.

Commercial leasing in Hyderabad witnessed a drop of about 21 per cent in Q3 2017 with about 1.24 million sq ft of gross absorption. However, the market performance continues to be intense in the SBD, as about 80 per cent of the total leasing volume was concentrated in this micromarket in Q3 2017.

A few notable transactions in SBD above 0.1 million sq ft (9300 sq m) were witnessed, with space taken up by companies such as Microsoft, Ness Technologies and Karvy Corporate. In addition, the Off-Central Business District (Off-CBD) accounted for about 11 per cent of the absorption pie, while CBD and PBD continued with a stable trend of about 4 per cent share.

The commercial real estate outlook for the city is positive in the medium to long term.  As per Colliers Research, the slight slowdown in Hyderabad office market in Q3 is short term and is due to the impact of GST, as the developers and occupiers are busy adjusting their business processes following the passage of this new tax system. However, we foresee a healthy demand outlook for next three years with increasing pre-commitments and expansion plans of large size occupiers. Rents in SBD micromarket are likely to see a rise of 3-4 per cent annually by 2020, while other micromarkets are to stay stable.