Hyderabad, a city synonymous with India’s Information Technology (IT) prowess, has witnessed a significant surge in office space development over the years. As the landscape evolves, this surge prompts a critical examination of the opportunities and potential challenges that accompany the expansion.
Micro-Market Dynamics:
Historically, Hyderabad’s IT presence has transitioned from traditional Central Business District (CBD) areas to emerging IT corridors, notably HITEC City and Gachibowli. With support from the state government, HITEC City has transformed into a hub hosting multinational giants like Qualcomm, JP Morgan, Google, and Microsoft, as highlighted in a report by Property Share.
The report emphasizes two key micro-markets in Hyderabad: HITEC City and Gachibowli. HITEC City, comprising 61% of the stock, is approaching saturation, while Gachibowli, accounting for 29%, is witnessing a surge in annual supply additions since 2019, expected to continue until 2025.
Investment Considerations:
As HITEC City anticipates newer expansions, primarily in Gachibowli, due to available land and unique FSI policies, commercial real estate investors are urged to consider pre-leased office opportunities in HITEC City. The market offers stability, with steady supply growth and moderate rental expectations.
Gachibowli, an emerging market, boasts a robust supply pipeline until 2025, but cautious investor sentiments are recommended due to higher expected vacancy levels and flat rentals.
Future Projections:
Hyderabad is poised to witness a remarkable addition of 40 million sq ft of Grade A supply by the end of 2025, marking a 37% increase and bringing the total supply to 148 million sq ft. However, the report forecasts a rise in vacancy rates to 24% by H2 2023, up from 15% in 2021, reflecting the influx of supply.
Investment Insights:
Experts suggest that amidst the evolving dynamics, investment decisions, particularly in pre-leased opportunities, can provide stability and long-term growth for commercial real estate investors. The key lies in understanding the shifting landscape and strategically positioning investments for optimal returns.
