According to a report by industry association Credai’s Hyderabad unit, the technology sector’s growth spurred significant investments by global firms in establishing world-class offices in Hyderabad. (Representative image)Over the last few years, Hyderabad has emerged as one of the country’s leading industrial and IT hub helped by growth in global capability centres (GCCs), IT-ITeS companies setting up operations in the state and a thriving base for pharmaceuticals and healthcare.
According to a report by industry association Credai’s Hyderabad unit, the technology sector’s growth spurred significant investments by global firms in establishing world-class offices in Hyderabad.
Credai brought out the report in association with property consultants JLL and Knight Frank on the housing, infrastructure and investment scenario in the city.
Hyderabad’s grade-A office stock rose the fastest among all major Indian cities, growing by 1.7 times between 2016 and H1 2021. It rose to 77 million sq ft (MSF) by H1 2021, making Hyderabad the fourth biggest CRE market in India by size. The city has also improved its share in total grade-A office stock in India from 9% in 2016 to around 12% at present, the report said.
One of the reasons behind the city emerging as a CRE hub is the presence of GCCs, with the city being home to nearly 250 GCCs with a workforce of around 2 lakh across technology, engineering & manufacturing, financial services and pharma & healthcare. The IT-ITeS sector takes up the majority share in leasing activity year-on-year. There has also been a significant improvement in the share of BFSI and co-working segments in the past couple of years.
The city office market witnessed the highest ever net absorption in 2019 at 10.5 MSF driven by a strong pre-commitment activity in the new supply of grade-A office space, which was a record high at 13.2 MSF in 2019.
With easing of lockdown restrictions in Q3 2020, Hyderabad was able to experience a significant traction in real estate activity. While supply witnessed a healthy growth with more than 10 MSF being added in 2020, net absorption was slightly lower at 6.5 MSF but still the second highest in the country.
Hyderabad’s office stock grew by 1.7x between 2016 and 2020. New supply of 34 MSF added from 2016 till H1 2021, second only to Bengaluru. The city has taken an average of 1/4th share of pan-India net absorption for 2019 and 2020.
Its contribution to India’s total gross leasing remained robust with a share of 16.1%, 19.2% & 18.4% in 2018, 2019 & 2020, respectively. Owing to the consistent office demand from occupiers, rentals steadily increased at a CAGR of 4% over the past five years. Institutional investors & REITs accounted for partial/ full ownership in 27% of the total grade-A office stock at the end of 2020.
Hyderabad is also fast emerging as the new data centre (DC) hotspot in India, driven by proactive regulatory incentives, competitive construction costs and a large user market. The city has five operational DC facilities with 30 MW capacity and accounts for a 7% share of the co-location data centre market currently and expects to see its share rise to 10% by 2023.
The growth potential is backed by significant investments committed towards creation of greenfield data centre campuses by global cloud players. The city is expected to add 66 MW during 2021-23, driven by growing demand from IT/ITeS, pharma and cloud players. The capacity addition would require development of around 0.5 MSF of real estate development.
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