Beyond Covid-19, how occupiers and developers of Hyderabad are navigating the crisis
Office leasing in Hyderabad
During 2019, gross office leasing in Hyderabad touched its highest ever and the city shared the second place with Delhi-NCR with regard to office leasing activity pan India. The city’s growth is attributed to political stability after the formation of a new state, Telangana, that emphases on quality of life and adequate infrastructure, which are driving the office demand. In 2019, the city witnessed 9.5 million sq ft of office leasing activity. In addition, it witnessed 3.8 million sq ft of pre-commitments.
Supply influx is expected to be limited in 2020
In the beginning of 2020, what has been a health crisis, transformed into an economic crisis. With all the major economies battling to keep up their economic growth, the year 2020 has begun with unforeseen events including downward revision of India’s economic growth, problems in the banking sector, and the outbreak of COVID-19. Hyderabad, which is already reeling under the pressure of limited supply and single digit vacancy levels in most key micromarkets has witnessed sluggish construction activities. Despite central and local government’s relaxation of construction activities, the supply projection of 19 million sq ft made at the beginning of this year is unlikely to realize. As a result of reduced influx of supply and delay in decision making by occupiers, Colliers International expects softening of office leasing activity, missing the initial forecast of around 9.5 million sq ft in 2020.
Talent availability and infrastructure improvements in order to maintain occupier interest in Hyderabad
Strong pre-commitments, diversified tenant mix, matured talent pool and local authorities proactive functioning during lockdown were driving the city. According to a study by Belong, Hyderabad witnesses 40% to 60% less attrition rate. Also, the talent pool of data scientists and UI/UX designers are available at a 10% to 20% lesser average salaries compared to other Indian cities.
According to NASSCOM, Hyderabad has transformed from an entry level talent-specific city to a matured and good engineering talent city. Added to this, the local government’s proactive steps in making the most out of this lockdown period is to create positive pro-business sentiments in the market. The local authorities were active in speeding up the road works, clearing pending crucial infrastructure work, and clearing the NOC (no objection certificate) of real estate buildings, helping supply to enter the market. These measures signaled positivity and enhanced ease of living.
COVID-19 implications and recommendations for occupiers and developers
In the wake of re-opening of office space with limited capacity, we recommend occupiers and developers to realign their strategy and operations to changed new realty. In order to implement social distancing at work, most of the IT-BPM occupiers of Hyderabad are taking innovative and zero capex measures to de-densify the workplace. Reorganized shift timings and re-oriented seating plans are some of the common measures to build confidence among workforce.
Driven by the strong market fundamentals on both demand and supply side, we expect Hyderabad to bounce back swiftly to a new normal in coming quarters. Occupiers and developers shall realign, given the changing dynamics of the office market.