How Hyderabad’s office market is challenging Bengaluru’s top spot3 min read . Updated: 16 Aug 2018, 12:15 PM IST
Ease of doing business, quick project approvals and proactive governance give Hyderabad a clear edge over others
Bengaluru: Hyderabad, a late-starter among property markets, is fast gaining momentum among investors, multinational occupiers and developers, giving its commercial office market a boost big enough to challenge Bengaluru’s top position.
There is a lot going in favour of Telangana’s capital city, including ease of business, quick project approvals, proactive governance and good infrastructure, giving it a clear edge over many others, including Bengaluru, which faces major issues with poor public transport and mobility and congestion.
Telangana came a close second to Andhra Pradesh in the ease-of-doing-business rankings in 2018, compared to Karnataka’s 8th rank.
Hyderabad is expected to complete 33 million sq. ft of commercial office space between 2018-2021, increasing its stock by 60% compared to around 23.7 million sq. ft of new office space supply in Bengaluru, according to estimates by Colliers International India.
Bengaluru still occupies the pivotal position as far as India’s commercial office market is concerned and has been the investors’ darling. However, Hyderabad has been bridging the gap sharply.
“Given the stable political environment, infrastructure initiatives and large pool of skilled professionals, Hyderabad has established itself as a prominent IT hub. Office stock in the city has increased two-fold in the past decade, witnessing robust rental growth thanks to the presence of global IT companies," said Sanjeev Dasgupta, chief executive officer, Ascendas India Trust (a-iTrust), which is part of Singapore’s Ascendas Singbridge.
Hyderabad is a key city in a-iTrust’s portfolio and has three assets across 3.4 million sq. ft of office space, valued at over ₹ 2,500 crore. In addition, a-iTrust said it will acquire two upcoming office buildings at aVance Business hub for up to ₹ 1,400 crore.
There’s a reason why IKEA of Sweden chose Hyderabad to open its first store in the Hi-tech City, a business district. Before the retail giant had zeroed down to Hyderabad, it looked at other cities, including Bengaluru, but it was the then Andhra Pradesh government and later Telangana’s persistence along with relatively easier permissions that the store was set up here without much delay.
“The government’s initiative in attracting investments, shaping the infrastructure including metro connectivity, power supply surplus have played a major role in Hyderabad. Companies in Bengaluru are looking for a second city to grow in, while in Hyderabad, occupiers of office space want to further expand within the city," said Ritesh Sachdev, senior executive director, occupier services, at Colliers International India.
Developers and consultants said information technology and industries minister K.T. Rama Rao runs the city like a private enterprise and perceives himself as its chief executive officer. He set up the Telangana State Industrial Project Approval and Self-Certification System (TS-IPASS) in 2015, which cut short the approval time-frame to a maximum of 30 days. In two years, it generated ₹ 73,000 crore in investments and created 2.56 lakh jobs in the process.
Bengaluru’s Salarpuria Sattva Group has 12 million sq. ft of office projects under construction in Hyderabad, and has been funded by global investor Blackstone Group Lp, compared to 2.5 million sq. ft in the former.
“Hyderabad is a tempting market and we are further expanding there. A combination of factors work in Hyderabad’s favour, which is why demand for good quality office space is high and multi-national corporations like the city," said managing director Bijay Agarwal.
In August, JP Morgan Chase & Co signed a 10-year lease deal for 830,000 sq ft with Salarpuria Sattva for the latter’s upcoming Knowledge City project in Hyderabad, a project that will house other MNCs like Novartis Healthcare and Microsoft India. JP Morgan has also taken up 1.1 million sq ft in Embassy Tech Village, Bengaluru.
Bengaluru’s Embassy Group and regional developer Phoenix Group are developing 10 million sq ft of office space in Hyderabad.
Bengaluru’s RMZ Corp’s corporate chairman Raj Menda says Hyderabad has the desired business environment, which is proactive for development and conducive for occupiers, something one wishes Karnataka possessed. In 2017, it announced plans to pump in $1 billion to develop around 10 million sq ft in Hyderabad in the next three years or so.
Colliers’ Sachdev says the only challenge Hyderabad could face is in attracting the kind of talent that Bengaluru does with ease, where 70-72% of the talent is migratory.
Yunus Y. Lasania contributed to the story.