High Demand for office space in Madhapur, Gachibowli and Hitech city
The second quarter of 2013 saw an office space supply of around 8,40,000 sq. ft in Hyderabad city. A sizable 60% of this supply was in the IT space while nearly 15% was in the Special Economic Zone (SEZ) space. The Grade A category of office space accounted for about 75% of the total supply, of which 80% was already committed. The rate of vacant office space was also considerable at 18%, which was 1% less that the figure compared to the previous quarter.
Madhapur records least vacancy levels:
What was notable was that Grade A office space in suburban Madhapur recorded a fall in the vacancy levels to below 2%. The reason that can be attributed for this is due to the fact that this location was strongly preferred by many takers. Besides, its proximity to prominent residential pockets along with excellent connectivity to central and suburban areas can also be cited as reasons for office space being preferred in this upcoming area.
Madhapur and Gachibowli record highest net absorption rate:
The net absorption rate recorded in the city in the second quarter of 2013 was approximately 9,50,000 sq. ft, of which about 4,94,000 sq. ft of space was already committed. This was a two-fold leap compared to the previous quarter. Among the different micro markets across the city, suburban areas which are fast developing like Madhapur and Gachibowli witnessed about 90% of net absorption of office space. Of this, there was a clear preference for Grade A office space with a majority (90%) opting for it as a telling sign that quality space was given the upperhand over other considerations.
Demand more for Grade A office space:
Moreover, it was seen that the average office space size chosen by takers for this quarter was 10,000 sq ft. Another notable feature was that rentals across sub markets remained in the same range as they were in the previous quarter, except for minor deviations in certain sub markets. Another significant feature that stood out this quarter was that pre-commitments to the tune of 3,25,000 sq. ft was witnessed compared to the previous quarter which saw no pre-commitments. About 80% of the pre-commitments for this quarter was for upcoming Grade A office spaces in suburban Madhapur market.
What is notable is that vacancy for Grade A office space in Madhapur is considerably low due to the fact that most of the upcoming supply for space is already committed. What is also important is that there is likely to be a stable trend in rentals across the city. The only exception to this could be in the case of the suburban Madhapur market, where rental appreciation is expected due to sustained demand for quality office space.
Other micro markets in demand:
Some of the other micro markets where the demand is considered to be considerably high is in areas like Banjara Hills and Hitech city. The average price for office space in these areas is Rs. 8,380 per sq. ft and Rs. 6,830 per sq.ft respectively. From among these areas, Hitech city has the highest appreciation rate of 20% compared to the last quarter.
Rental rates among different micro markets in the city, were higher for markets like Banjara Hills, Jubilee Hills, Madhapur, Raj Bhavan road and Somajiguda. The highest appreciation in rental values was seen in micromarkets like Himayath Nagar, KPHB Colony and Somajiguda, which was in the range of 15-20%.
