HYDERABAD: With a net absorption of 3.42 million sq ft, Hyderabad dominated the office space market in the first quarter (Q1) of 2022 and recorded the highest net absorption among the top seven cities in the country, according to a report by the JLL.
As per the Office Market Report, new project completions peaked in the city at 4.77 million sq ft during the quarter, driving the vacancy up to 15.8 per cent. Net absorption in the city’s Grade A stock was driven largely by the pre-commitments in new completions. In fact, the new completions had a cumulative pre-commitment rate of 77 per cent, the highest among all cities this quarter. Most of the upcoming supply is concentrated in key office sub-markets of Gachibowli and Hitec City.
Expected to grow
The net absorption is expected to record healthy growth in 2022 with the likely completion of fully pre-leased assets in the next two quarters. However, the vacancy is expected to remain stable or grow marginally in the short to medium-term.
The report predicts that rents are likely to remain stable in the short to medium-term. As the market stabilises, steady growth in rentals is likely with premium Grade A supply becoming operational. Office rentals have slightly increased from Rs 59.3 per sq ft per month in Q2 2020 to Rs 61.5 per sq ft per month in Q1 2022.
On a year-on-year basis, the average office rentals in the markets of Hyderabad, Bengaluru and Kolkata increased by 1.6 per cent, 1.9 per cent and 2.1 per cent respectively. Rents were otherwise largely stable across the other cities. Developers and landlords do not prefer headline rent reduction as a tool but still have remained flexible in accommodating occupier demands.
Tech sector leases the most
With regard to share in net absorption, the tech segment continued to lead but its share stood at 25 per cent, while the manufacturing or industrial segment, with its share at 17 per cent in the quarterly leasing activity, continued to gain momentum on the back of proactive policy measures. Consulting also saw its leasing share jump to double digits at 13 per cent with the banking, financial services and insurance (BFSI) sector accounting for a 10 per cent share.
JLL’s report highlighted that the hybrid model is here to stay. While tech companies are slowly bringing workers back to the office, a hybrid model with time split between offices, homes and other options is likely to be implemented across companies based on their own dynamics but will not be a one-size-fits-all solution.
What is net absorption?
According to JLL, net absorption is the sum of square feet that became physically occupied, minus the sum of square feet that became physically vacant during a specific period