Realty bites? Hyderabad saddled with 18m sft of empty office space

HYDERABAD: As chief minister A Revanth Reddy returned with investment promises of over Rs 31,500 crore from the US, the city's realty industry is wondering if it will finally help absorb Hyderabad's empty office space.


Saddled with its highest ever vacancy of over 18 million square feet (sft), with another 22 million sft (approx) of new supply in the pipeline, the sector is anxiously waiting for companies to sign deals.


Currently, close to a dozen ‘A' grade (with premium location, amenities) office buildings across Gachibowli and Financial District are lying unoccupied – their individual vacancies ranging anywhere between 1.5 million sft and 5 million sft. The total office stock of this tech belt: 37 million sft.


"Buoyed by the pent-up demand post-pandemic, the market went on an overdrive in the last couple of years. This resulted in oversupply," said a leading developer with more than 2.5 million sft of vacant space in the Financial District.


There are other reasons too: soaring land costs, unlimited FSI (floor space index), and poor connectivity, say real estate consultants.


"Significant escalation in land prices over the last few years led to many developers concentrating on commercial projects for better returns. Also, both landowners and developers built as much as they could to make the most of the unlimited FSI," said Aju Thomas, co-founder of Trinity Partners and Ciril. "The high vacancy rate is also rooted in many of these buildings not meeting IT industry standards."Not surprising then, leasing rates in this area have stagnated with many developers even willing to settle for a lower price. "The rates had gone up to Rs 68 to Rs 70 per sft in the past. Now, it is consolidating around Rs 55 to Rs 60 per sft. Some players are even going down to Rs 45 per sft to beat the race," said the director of a major construction firm. The pace will pick up only once this IT zone gets better connectivity through public transport, he feels.


Consultants also suggested that authorities put brakes on the approval process and not give the go-ahead to any more large commercial projects, at least for next three years.

Significant escalation in land prices led to many developers concentrating on commercial projects for better returns. Also, both landowners and developers built as much as they could to make the most of the unlimited FSI,” said Aju Thomas, co-founder of Trinity Partners and Ciril.

Not surprising then, leasing rates in this area have stagnated with many developers even willing to settle for a lower price. “The rates had gone up to Rs 68 to Rs 70 per sft in the past. Now, it is consolidating around Rs 55 to Rs 60 per sft. Some players are even going down to Rs 45 per sft to beat the race,” said the director of a major construction firm.

Despite a stock of over 65 million sft, the Madhapur market continues to record good leasing numbers. Not only is the vacancy rate here a low 9.5%, even the leasing prices are as high as Rs 80 per sft.

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