Bengaluru: Strong signs of recovery were witnessed in the Hyderabad office market in Q3, 2020 with a healthy gross leasing at 1.9 mn sq. ft., according toJLL Research. At the same time, net absorption grew by 31 per cent from the previous quarter to 1.5 mn sq. ft. in Q3 2020.
The city saw new completions of 3.3 mn sq. ft. during the quarter with Gachibowli and HITEC City submarkets being the highest contributors to the new supply. Nearly 81 per cent of the new completions were already pre-committed.
Rentals have largely remained range bound across most of the submarkets in the city during the quarter.
“The growth was mainly driven by pre-commitments in newly commissioned buildings during the quarter. As a fallout of the pandemic struck economy, occupiers are reassessing their real estate portfolios in a bid to reduce costs and review long term expansions. Thus, significant churn was also witnessed during the quarter,” saidSandip Patnaik, Managing Director (Hyderabad), JLL India
Occupancies in the city have been impacted, thus resulting in a rise in vacancy to 11.3 per cent at the end of Q3 2020 from 9.2 per cent at the end of the previous quarter. The submarkets of CBD, HITEC City, and Gachibowli saw increased vacancies due to exits by local business and small IT companies, he added.
The country’s office market witnessed a net absorption of 5.4 million sq. ft. in quarter ending September 2020 (Q3), an increase of 64 per cent versus quarter ending June 2020 (Q2). This is an encouraging trend especially after net absorption dipped almost at a similar rate in the second quarter, said JLL.
The third quarter office rebound growth was led by Bengaluru and Hyderabad, which together accounted for nearly 80 per cent of the net absorption in Q3 2020. The heightened activity in Bengaluru indicates a gradual resurgence in take up of spaces coupled with the translation of pent up demand from Q2 this year.
While the share of IT/ITeS occupiers in gross leasing dipped to 43 per cent in Q3 2020 from 61 per cent in Q2 2020, e-commerce and manufacturing sectors gained significant shares during the third quarter forming 16 per cent (negligible in Q2 2020) and 17 per cent (5 per cent in Q2 2020) respectively, owing to surging demand of e-commerce during COVID19.
New completions during Q3 2020 increased by 59 per cent quarter-on-quarter with 9.2 million sq ft of new stock coming to market. Bengaluru and Hyderabad led the increase in new completions accounting for 87 per cent of the total new completions in Q3 2020.
“With lockdown restrictions being relaxed in the third quarter in most of the markets under review, office projects in the final stages of construction or pending receipt of occupancy certificates came onboard. This resulted in an increase in the supply of office space, even surpassing 8.6 million sq. ft. witnessed in Q1 2020,”said Dr. Samantak Das, Chief Economist and Head of Research & REIS, India, JLL.
Increased office space consolidation and optimisation strategies of corporate occupiers resulted in subdued net absorption levels, which could not keep pace with new completions. This resulted in overall vacancy increasing from 13.1 per cent in Q2 2020 to 13.5 per cent in Q3 2020, mentioned the report.
Rents in Q3 2020 vs Q2 2020 also remained stable across all markets under review except Bengaluru which witnessed a marginal increase in rents.