Unsold office space inventory piles up in Nanakramguda

Hyderabad: Though residential market is witnessing a boom in Nanakramguda Financial District, office space has not yet recovered from pandemic lows. Since the beginning of Covid-19, the office demand has seen a declining trend and overall leasing volumes decreased drastically in the region during the last couple of years.

The low absorption of office space in Nanakramguda can be attributed to Covid scare, work from home (WFH) options and hybrid work culture at the offices of information technology (IT) firms and multinational companies (MNCs). The growing number of co-working spaces also led to the unused inventory overhang in the office space.

Earlier, it was assumed that these offices in the locality will reopen for the staff after the completion of countrywide vaccination drive. Now, in the wake of Omicron variant scare, neither the managements nor the employees are showing interest to return to the offices. Still, many companies are providing WFH option to 100 per cent of their workforce.

In 2020 and 2021, the pandemic has badly affected the office asset class in the IT corridor of West Hyderabad. Particularly, the impact is more visible in Nanakramguda where office absorption is less and availability is at peaks. While there is a huge supply of office space, the demand for new buildings is low.

"The construction of commercial buildings often happens by targeting the MNCs' requirement. Each MNC may need a minimum 2-5 lakh sft of office space. Keeping such clients in the mind, the property owners didn't lease out the space to any low-profile companies. New clients have not come up during the Covid times," says a property consultant Raja Rao.

He adds that theunsold inventory in residential segment is not even 5 per cent in Nanakramguda, whereas more than 50 per cent of office space in the area has been lying vacant from past two years.In next three-four years, a lot of inventory will come up in the region and the small-scale developers will feel the heat.

According to another real estate consultantRajesh M Kumaraswamy, the realtors who already completed the construction are on a safer side. Also, the branded builders know how to grab the business. Only second-grade builders may face troubles due to the strict competition. Probably, the situation may improve after March 2022, he said.

In spite of several requests from the State government, the MNCs and other corporate offices are not reopened in the city. This is a tough time for those who invested crores of rupees in the IT offices and buildings. The existing companies face no loss as they were given space at a subsidy rate in the TSIIC - IT/ITeS SEZ area in Nanakramguda.

"While the commercial space is leased out at Rs 150-170 per sft, the IT/ITeS companies got it for just Rs 20-30 per sft under the SEZ Act. Moreover, they are saving 60 per cent of expenses on housekeeping, security, cafeteria and Zodexo passes. Restaurant contractors and other agencies are facing losses due to no occupancy," Kumaraswamy informed.

IT majors like Microsoft, Infosys and Wipro took the land from TSIIC at a very less cost and started construction. Amazon has opened its globally largest campus at Nanakramguda. US Consulate also started construction of its own building here. GAR Infobahn has eight towers in the locality. While 1-4 towers are operational and the rest are under construction.

Apart from these, the company is planning to build five towers in the same region. Sampath Charandas, General Manager at GAR Corporation, said: "Currently, the demand for office space in this area is down due to some confusion. This location will again be on the top in terms of office leasing and rentals."

"Nanakramguda, Kokapet, Narsingi and Gandipet areas have good connectivity and infrastructure facilities. People prefer to reside in these areas. Once the market starts picking up, larger institutes and corporates will definitely look towards this region to set up their own campus," he added.

Last year, Hyderabad Metropolitan Development Authority (HMDA) generated Rs 2,000 crore from auctions conducted for eight land parcels in Kokapet. Rajapushpa Realty LLP owned asingle plot in the 'Golden Mile' layout for Rs 60 crore. This deal has boosted the confidence of many realtors on this region.