Changing trends in the Indian office market and understanding the new workings
Hyderabad has gradually established itself as one of the main IT/ITeS destinations in the country. The advantages offered by the city, such as good infrastructure and a business-friendly environment, are both compelling and competitive. Other major sectors that have their presence in the city include biotechnology, hardware, pharmaceuticals, and telecommunications.
Mr. Sanjay Dutt, Co-Chairman of the FICCI Real Estate Committee and Managing Director and CEO of Tata Realty & Infrastructure Ltd., said: “FICCI and Vestian have co-created this report on emerging trends that are being embraced in office spaces by professionals. businesses across the country. . We observe that India is changing working cultures and environments. I am convinced that the findings of the report would be useful not only to real estate agents, but also to consumers, government, research and academic institutes and industry. These insights and deliberations would help us all do a lot to address the regulatory challenges and think about the way forward. »
Dr Shrinivas Rao, FRICS, CEO of Vestian, said: “This report aims to provide insight into the various facets that have emerged during the pandemic, most of which are still constantly evolving in tandem with the changing scenario. With the COVID-19 event impacting occupant expectations and consequently driving a change in market dynamics, it is imperative to understand the opportunities presented in the new environment. New cogs such as proptech, ESG implementation and policy shifts have emerged on the real estate scene and hold the potential to take the sector to the next level of development.
Main highlights of Hyderabad in the report:
- Western outlying office markets, comprising locations such as Madhapur, Gachibowli, Raidurg and Nanakramguda, continued to dominate office demand, mainly because more than 90% of Grade A office space, preferred by the IT/ITeS sector and others, are located here.
- Although the government has been working to create a more equitable development of office space across the city and away from the center west, little movement has been seen in outlying markets to the east and south.
- Despite the decline in office space absorption, the IT/ITeS sector – the mainstay of the Hyderabad office market – continued to dominate demand except for H2 2021.
- The H2 2021 period saw the engineering/manufacturing segment take center stage, with their share far exceeding that of the IT/ITeS sectors. Interestingly, hardware manufacturers made up a significant portion of the segment, describing Hyderabad’s growth as a preferred hub for such activity.
- While several IT/ITeS companies have postponed their expansion plans during the pandemic, many have opted to occupy space in coworking/managed offices as a measure of business continuity. As a result, the share of the coworking operator segment has increased sharply since 2021, standing at 24% of total uptake in H1 2022.
Prepare for the future by understanding the new wheels of office market dynamics:
- The push towards infrastructure development has been one of the major catalytic factors to boost the market in the aftermath of the pandemic. Additionally, political announcements such as granting infrastructure status to data centers and rebuilding SEZ standards would undoubtedly impact the office market.
- In FY 2021, around 30 companies hired 3.6 lakh first-years out of which top 5 Indian tech companies such as TCS, Infosys, Cognizant, HCL Tech and Tech Mahindra hired 2.3 lakh first-years year. This alone would result in the absorption of over 18.5 million square feet of office space in India.
- With the advent of ESG, the focus on sustainability has led to a dramatic increase in investment in green buildings and clean energy infrastructure. Compared to conventional structures, buildings with stronger environmental credentials that describe ESG compliance generate higher rents, higher sale prices, increase retention rates, and also show lower obsolescence rates.
- Coworking spaces in India, initially occupied by start-ups and freelancers, are now seeing growing preferences from large corporations in Tier I and Tier II cities. Unsurprisingly, the sector represented nearly 20% of surface areas transacted in H1 2022 compared to 15% in 2021.