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Hyderbad Registers 50 pc Rise in Net Absorption, Say Global Experts

Published: 07th February 2015 06:00 AM  |   Last Updated: 07th February 2015 04:18 AM   |  A+A-

HYDERABAD: The top eight cities in India recorded an overall net office space absorption of 32.5 million square feet (msf) in 2014, with Hyderabad registering an overall net absorption of 4.4 msf, said to a report by global real estate consultants, Cushman & Wakefield.

Hyderabad witnessed a 50 pc increase in net absorption compared to 2013, out of which 3.7 msf net absorption was in Grade A developments, which was more than double the previous year.

Absorption rate is essentially the rate at which homes/offices are sold in a specific real estate market during a given time period. It is calculated by dividing the total number of available homes/offices by the average number of sales per month.

Experts believe that major increase in Grade A net absorption was due to the significant pre-commitments for the 4.5 msf Grade A supply in 2014.

As per the report, Grade A vacancies increased by 0.7 percentage points in the year to 14.3 per cent. Madhapur (66%) and Gachibowli (19%) had the highest share in leasing. IT-ITeS occupiers continued to drive the leasing activity with 74% share during the year.

The report further stated that 1.3 msf of total pre-commitments were recorded in 2014, majorly driven by occupiers preferring SEZ developments in Madhapur.

Net absorption is expected to remain in similar range with a slight upward bias in 2015. However, comparatively lower infusion of supply, which is already highly pre-committed, may lead to a decline in overall vacancies, experts believe.

Among other cities, Bangalore tops the charts with highest net absorption of 8.9 msf, Ahmedabad registers a 163 per cent increase in net absorption in 2014 and Kolkata records highest overall vacancy of 28 per cent, followed by Delhi-NCR at 26.8 per cent.

‘’With the election of a stable single party government coming into power by the mid of 2014, overall business sentiments have improved with the office market seeing significant levels activities in the second half of 2014. Many companies began executing their growth strategies with greater confidence leading to improvement in demand for office spaces. We believe that demand for office will remain robust in the next two years as many companies continue to relocate and adopt workplace transformation strategies,” said Sanjay Dutt, Executive Managing Director, South Asia, Cushman & Wakefield. 

Experts remained optimistic about the improvement in absorption this year and felt that rentals are likely to remain stable.

“Pick-up in hiring and growth in demand for new developments will lead to an overall improvement in absorption volumes. Rentals will continue to remain largely stable due to likely high supply addition expected in 2015, which will in-turn help many markets remain occupier favourable in the short term,” Dutt observed.

He said, “2014 saw a significant increase in the number of large deals with office spaces over 200,000 sf contributing to 50 pc of the total Grade A office leasing.

More from Hyderabad.

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