Hyderabad has absorbed 214,000 sq ft in first quarter this year, while new supply of SEZ space is about 360,000 sq ft. While the city witnessed stable leasing and pre-leasing activity during the first quarter, companies have expanded and consolidated their requirements by shifting from CBD and SBD areas to suburbs to take advantage of relatively lower rentals.
According to Jones Lang LaSalle’s quarter review, the city’s Grade B buildings in all submarkets continue to witness healthy leasing of small spaces ranging from 5,000 sq ft to 15,000 sq ft. However, some companies vacated space in the central business district (CBD) and moved to suburban locations in order to take advantage of the lower rentals.
In a related development, suburbs saw the highest leasing activity during the first quarter this year. Hi-Tech City and Gachibowli which saw strong absorption pace remained modest during the period. The preference for SEZ continued to remain strong amongst tenants and a few of them were inclined to move to locations such as Uppal and Pocharam in the suburban areas.
Among the major transactions in first quarter, specific mention must be made about Broadridge leasing about 200,000 sq ft in the Wipro building at Hi-Tech City and Genpact pre-leasing about 133,000 sq ft at KRC Mindspace East SEZ, at Pocharam.
Rentals are up by 6-6.5% in suburbs of Hitec City and Gachibowli during the first quarter. IT SEZ spaces commanded higher rentals due to preference by tenants and the supply exceeding demand. While investments continued to remain subdued due to political uncertainty, capital values increased in Hi-Tech City and Gachibowli by 12-13% in 1Q12 over previous quarter.
It is expected that strong pre-leasing activity will lead to increased net absorption during this year. Despite political uncertainty, the inherent infrastructure development and potential across the city have encouraged corporates to sustain and expand the operations with the result leasing activity is expected to remain stable. The demand and supply of SEZ space will lead to rentals witnessing a nominal increase or remain stable during the year. Capital values are expected to increase moderately as leasing activity will remain stable.
Source : Property Consultant