Bengaluru builders move to Hyderabad to fulfil office demand

BENGALURU: Hyderabad has become the new investment destination for Bengaluru’s commercial property developers at a time when the city’s real estate market is on a revival mode after almost half a decade of political turmoil.

Companies such as DivyaSree Developers, Salarpuria Sattva, Embassy and RMZ Corp have built or are in the process of building a substantial commercial portfolio in the city which, along with Bengaluru, is also home to some of the largest IT companies in the world, including Oracle, Microsoft and Uber. With rentals still low compared to other cities, companies are eyeing it as the next growth trajectory.

“Often existing customers will be looking for premises in other cities as it provides diversity and scale. With Hyderabad, rentals in the city are similar to ORR in Bengaluru for good quality product. But clearly it is strong on the infrastructure side and there is clarity now on the government after the political problems,” Mike Holland, CEO of Embassy Office Parks told TOI . DivyaSree has a commercial portfolio of about 8 million sqft in Hyderabad which includes office parks DivyaSree Orion, a SEZ, DivyaSree Omega and DivyaSree Square among others.

Major tenants include US bank Wells Fargo, fund manager Invesco and technology giant Google. Salarpuria Sattva, which has been present in the city since 2005, has a portfolio of about 15 million out of which 11 million are under construction. It counts pharmaceutical giant Novartis among its major clients.

Embassy Office Parks has tied up with city-based Phoenix Group to build an office park in the financial district of Gachibowli. The total area under construction is expected to be about 7 million sqft.

Hyderabad saw strong demand for office space until 2008, but the political agitation for the creation of the separate state of Telangana created an uncertain atmosphere leading to a sharp drop in leasing activity. With that issue being solved in 2014 and investor confidence back, Hyderabad’s market has recovered helped by strong leasing activity, timely completion of new commercial developments and investment flows across prominent suburban and peripheral markets.

“With low operation costs and a growing talent pool, the market is becoming a preferred location for developers from neighbouring cities, including Bengaluru, to consider expanding. Going forward, Hyderabad is best poised for robust growth and development,” Ram Chandnani, MD, Advisory & Transaction Services of CBRE India said.

The Bengaluru real estate market has traditionally been dominated by the Telugus who owned huge land holdings for decades across the city, especially in the northern corridor towards the airport. But the move by Bengaluru developers is like a reverse drain where huge investments from them have been channelized in the Hyderabad market for the first time. Mahesh Khaitan, a director at Salarpuria Sattva, attributed the move to the good infrastructure in Hyderabad which preceded development, unlike in Bengaluru where infrastructure has struggled to keep up with the surge in population.

“It is one of the best in the country coupled with a very proactive government that attracts builders and companies,” Khaitan said. “Many companies are looking to expand there because rentals in the IT corridors are still about 15-20% less compared to what one would get in Bengaluru. What the city lacks is social infrastructure.”

Office stock in Hyderabad nearly doubled to about 47 million sqft by 2015, from over 23 million sqft in 2008, representing CAGR of 11%, according to a report from CBRE.

Credits ET Realty

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