Hyderabad office leasing market witnesses 71% sharp increase in first half of 2024

Hyderabad: During the first half (H1) of 2024, the Hyderabad office leasing market saw a sharp 71 percent year-on-year (YoY) growth, transacting a total of 5.0 million sq ft of area.

According to a report by Knight Frank India, the country's premier real estate consultancy, large office spaces of 100,000 sq ft or more accounted for 61 percent of Hyderabad's total transactions in H1 2024, with 3.08 million sq ft transacted.

This marks 109 percent YoY growth compared to 1.47 million sq ft in H1 2023. The increase in absorption by Global Capability Centres (GCCs) and flex space operators can be primarily attributed to the rise in demand for large office spaces in the city.

In the first half of 2024, approximately 26 per cent of transactions, totalling 1.29 mn sq ft, occurred in mid-sized office spaces ranging from 50,000 sq ft to 100,000 sq ft. This category experienced a significant YoY growth of 200 per cent, up from 0.43 mn sq ft in H1 2023.

Small office spaces, measuring below 50,000 sq ft, made up 13 per cent of transactions in H1 2024, totalling 0.67 million sq ft.

“Hyderabad has seen strong growth in demand in recent years, reinforcing its position as a preferred hub for businesses. This demand is fuelled by the city’s exceptional quality of life, strong infrastructure, and steady influx of top-tier talent. The recovery of the Information Technology sector in 2024, along with increased hiring activity, particularly by Global Capability Centres (GCCs), is anticipated to further boost commercial leasing demand in the coming months,” said Knight Frank India's National Director- Occupier Strategy and Solutions (Hyderabad & Chennai), Joseph Thilak.

In H1 2023, the Information Technology sector which has been the mainstay of Hyderabad’s economic landscape, experienced a significant slowdown due to the economic downturn in the West, resulting in a drastic drop-in occupier activity from the sector during this period.

Fast forward to 2024, the sector has been showing signs of recovery, with hiring on the rise for profiles in emerging information technology such as Artificial Intelligence/Machine Learning (AI/ ML) and GCCs taking the lead resulting in an increase in space take up, said the report by Knight Frank.

Key tenants driving this trend include prominent names such as Sanofi and Cigna which have established or expanded their footprint in the city.

Rental rates increased by 4 per cent

Rental rates in Hyderabad have increased by 4 per cent YoY during H1 2024, with HITEC City experiencing a 5 per cent YoY rise. This uptick can be attributed to the increased demand for office spaces particularly from GCCs, which has driven up rentals in these areas.

In fact, the improvements in infrastructure and connectivity within HITEC City have also made it more attractive for businesses, thereby driving up rents. In contrast, rents in other business districts such as the CBD, PBD West, and PBD East have remained flat.