Hyderabad records net office absorption of 1.54 million square feet in Q3 2020: JLL

Hyderabad’s office market is showing signs of recovery, with a healthy gross leasing of 1.9 million square feet. Net absorption too grew by 31 percent from the previous quarter to 1.5 mn sq ft in Q3 2020, according to JLL Research.

The city saw new completions of 3.3 mn sq ft during the quarter, with Gachibowli and HITEC City sub-markets being the highest contributors to new supply. Nearly 81 percent of new completions were already pre-committed, it said.

Rentals have largely remained rangebound across most sub-markets in the city during the quarter.

“Growth was mainly driven by pre-commitments to newly commissioned buildings during the quarter. As a fallout of the pandemic struck economy, occupiers are reassessing their real estate portfolios in a bid to reduce costs and review long term expansions. Thus, significant churn was also witnessed during the quarter,” said Sandip Patnaik, Managing Director (Hyderabad), JLL India.

Occupancies in the city have been impacted, thus resulting in a rise in vacancy to 11.3 percent at the end of Q3 2020 from 9.2 percent at the end of the previous quarter. The sub-markets of CBD, HITEC City, and Gachibowli saw increased vacancies due to exits by local business and small IT companies, he added.

India office absorption up 64% QoQ in Q3 2020

The country’s office market witnessed a net absorption of 5.4 mn sq ft in the quarter ending September (Q3), an increase of 64 percent versus the quarter ending June (Q2). This is an encouraging trend, especially after net absorption dipped almost at a similar rate in the second quarter.

The rebound in growth was led by Bengaluru and Hyderabad, which together accounted for nearly 80 percent of net absorption in Q3 2020. The heightened activity in Bengaluru indicates a gradual resurgence in taking up of spaces, coupled with the translation of pent up demand from Q2, JLL said.

While the share of IT/ITeS occupiers in gross leasing dipped to 43 percent in Q3 from 61 percent in Q2 2020, e-commerce and manufacturing sectors gained significant shares during the third quarter, up 16 percent (negligible in Q2) and 17 percent (5 percent in Q2), respectively, owing to surging demand of e-commerce during the pandemic.

New completions during Q3 2020 increased by 59 percent quarter-on-quarter with 9.2 million sq ft of new stock coming into the market.

“With lockdown restrictions being relaxed in the third quarter in most markets under review, office projects in the final stages of construction or pending receipt of occupancy certificates came onboard. This resulted in an increase in the supply of office space, even surpassing 8.6 million sq ft witnessed in Q1 2020,” said Samantak Das, Chief Economist and Head of Research & REIS, India, JLL.