Resilient Hyderabad commercial real estate

Hyderabad is one of the fastest growing technology hubs in India. The city has emerged as one of India’s fastest expanding real estate markets, led by aggressive government policies, superior infrastructure, and a large pool of talent. While the pandemic hindered office leasing business across markets, the rebound in Hyderabad’s lease activity in the second […]

Hyderabad is one of the fastest growing technology hubs in India. The city has emerged as one of India’s fastest expanding real estate markets, led by aggressive government policies, superior infrastructure, and a large pool of talent. While the pandemic hindered office leasing business across markets, the rebound in Hyderabad’s lease activity in the second half of 2021 has been strong.

GRID policy influencing the commercial realty development:

Hyderabad’s growth in dispersion (GRID) policy aims at expanding the IT industry to the non-western regions. According to Knight Frank India research, office market remained stable in 2021, with transaction volumes matching the previous year’s annual total of 6.0 million square feet. In the first quarter of 2022, Hyderabad made a promising start with office space transactions increasing by 72 per cent year on year to 1.6 million square feet, while average transacted rent remained stable at Rs 61.7 per square feet per month.

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The IT industry continues to be the lead office occupier, contributing 55 per cent to all transactions. Technology players, non-bank financial services as well as international pharmaceutical companies continue to be prime occupiers of the good quality office spaces (Grade A) in the city.

The commercial real estate market in Hyderabad is also undergoing a change toward co-working spaces, which has bridged the gap between occupiers and developers. Co-working has evolved into what is now popular as ‘Managed Office’ space due to the flexibility they offer in terms of cost, tenure and amenities. This also has become increasingly popular because of the new flexi and hybrid work culture in the post-pandemic era. New firms continue to enter the managed office cum co-working space market, with the goal of setting up their footprint in the city. The existing ones who survived the Covid continue to expand their portfolio even as occupiers seek to resume their office space in order to reduce attrition.

Factors influencing the growth of commercial real estate market in Hyderabad:

Despite the deferment in return to office in the first quarter due to the impact of Omicron, the Hyderabad occupancy level have remained strong, topping 88.2 per cent in first quarter of 2022 compared to 87.8 per cent in fourth quarter of 2021 and 85.6 per cent in third quarter of 2021. The IT industry is leading with 55 per cent share of total transacted space, followed by BFSI (12 per cent).
While technology companies are adopting remote working methods to attract internationally distributed talent, the necessity for physical hubs with accompanying digital infrastructure remains. Factors such as existence of well-planned infrastructure and rising opportunities in the IT/ITeS sector and manufacturing industries have boosted Hyderabad’s appeal.

Additional factors like good connectivity, supportive government policies and development of industrial and warehousing facilities have increased the demand for commercial properties in the growth corridors like Medchal, Shamshabad and Patancheru.

Supportive government policies:

Telangana has evolved over the past few years and has grown into a preferred destination for global investments under the leadership of Chief Minister K Chandrasekhar Rao.

The State government’s supportive industrial policies had played a crucial role in attracting investments and boosting the real estate market at large. While transaction volumes have increased, rental levels have remained stable or increased in the last two quarters. Occupancy levels are projected to improve as IT businesses return to the office; rents are also expected to firm up as demand increases. Overall, the outlook for commercial market in Hyderabad remains robust and is expected to reach the pre-pandemic levels.

-Samson Arthur
Senior Branch Director Hyderabad
Knight Frank India