Office space deals, home sales pick up in last quarter of 2020

Office space transactions in Hyderabad at six million sqft in 2020 were 53% lower compared to the previous year, a decline that could have been sharper but for a rebound, from the pandemic-induced lows, in the October to December (fourth) quarter.

Given 2019 stands out as the best in the decade with 12.8 million sqft, the 2020 transactions in comparison to 2018 were less by one million sqft and better than the 5.7 million sq ft and 5.9 million sq ft of 2017 and 2016 respectively, a report real estate consultancy Knight Frank India launched on Wednesday said.

The first (January-March) quarter in 2020 saw 2.2 million sqft office transactions reported across Hyderabad, while there were no transactions in the April-June quarter amid the lockdown. A pick up was seen in July-September with 0.5 million sqft, which accelerated to 3.34 million sqft in the fourth quarter.

Office transactions recorded 3.8 million sqft in H2 (July-December) 2020, jumped by 640% in Q4, compared to previous quarter, a release on the Hyderabad component of Knight Frank’s India Real Estate: H2 2020 report said.

New additions

In spite of supply challenges, owing to lockdown and exodus of labour in Q2 and Q3, Hyderabad’s office market recorded the second highest annual supply numbers in 2020. A total of 8.7 million sqft of new office space got added during the year, which is much higher than the decadal, annual average of 4.6 million sqft.

West Hyderabad alone accounted for 99% of the second half transactions volume, an indicator of strong occupier preference for the location in the city.

Knight Frank India Branch Director-Hyderabad Samson Arthur said “the office market saw a significant revival in Q4 2020. Despite pandemic impact, rentals remained resilient and office demand is now seeing a recalibration of size and design.” With vaccine round the corner, global companies have begun execution of their lease plans, he said.

A sharp increase in space absorption by BFSI sector — driven by two large deals that together accounted for 1 million sqft of the total leasing activity in H2 — helped temper a fall in demand from other sectors, including IT. Rents, however, remain almost unchanged.

Home sales

On residential real estate market in Hyderabad, the Knight Frank report said sales revived in H2, but not enough to stop 2020 annual sales from being the decadal low. A total of 10,042 units were sold during the year, which was a 38% decline compared to 2019.

Of the 5,260 units sold in H2, the transactions for 3,651 happened in the last quarter. Festive season promotions, COVID-induced push for newer homes with better layout to accommodate the new requirements of work from home and digital learning arrangements for kids and working parents, low home loan rates, softer residential prices and higher income savings were factors that pushed the demand, the release said.

The share of residential units priced below ₹50 lakh increased in the second half, pointing to growth of affordable housing segment. Hyderabad’s residential market launches in 2020 stood at 12,826 units, with 8,404 of them in H2. The spurt in launches coupled with relatively muted sales volume resulted in unsold inventory numbers to rise to 7,180 units in H2.

West Hyderabad continued to account for the highest share in residential launches, as well as sales, owing to its proximity to the IT business districts, the release said.

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