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March 28, 2014.

Hyderabad least expensive office market in 2013, says DTZ global report

Hyderabad least expensive office market in 2013, says DTZ global report

Bangalore: Hyderabad slipped a rung to become the least expensive office market in 2013, according to a new global study, mainly because of the prolonged strife in Andhra Pradesh over the formation of Telangana state.

Chennai, Pune, Bangalore and Kolkata were also among the 10 least expensive office markets in 2013, according to property advisory DTZ Research’s latest Global Occupancy Cost-Offices report.

Hyderabad, which was the second-least expensive office market in 2012 behind Surabaya (Indonesia), was at the centre of the four-year Telangana dispute.

Last week, Parliament passed a Bill for Andhra Pradesh to be split into Telangana and Seemandhra, with Hyderabad serving as the joint capital for 10 years before it is transferred exclusively to Telangana.

“Hyderabad has been mired by the Telangana issue and political instability because of which not many new occupiers have come in the last two years. Even with the Telangana Bill being passed, it’s a far cry from being business as usual,” said Rohit Kumar, head of research, DTZ India.

The DTZ report analysed the costs of occupying prime office space across 138 markets worldwide. Occupancy costs in the most expensive office markets exceeded $20,000 per workstation in 2013, and were less than $3,000 per workstation in the least expensive markets.

No Indian city features in DTZ’s 10 most expensive office markets list, even as rents and occupier interest in prime central business districts (CBD) in Mumbai and Delhi were robust last year.

London and Hong Kong continued to be the most expensive office locations in 2013. But the difference in costs between the two cities expanded from 13% in 2012 to 22% in 2013 as buoyant demand led to an increase in rents in London while cost-cutting measures in central Hong Kong drove rents down.

Surabaya saw office rents increase last year, pushing it a step higher to be the second least expensive office market in the DTZ study, swapping spots with Hyderabad.

In 2013, about 27 million sq.ft. of office space were absorbed across the seven Indian cities surveyed for the DTZ report—Delhi-national capital region, Mumbai, Bangalore, Chennai, Pune, Hyderabad and Kolkata—slipping marginally from 27.3 million sq.ft. in 2012.

But DTZ said in its report that rising demand for office space from information technology companies and high inflation is likely to push up occupancy costs in India this year.

Of the Rs7,000 crore of private equity money that flowed into Indian real estate in 2013, Rs2,476 crore was in commercial office assets, down from Rs3,231 crore in the year before, says a report on PE investments in real estate by property advisory Cushman & Wakefield, released on Monday.

Overall absorption of commercial office space in India was lower in 2013 primarily due to high relocation and consolidation activity with occupiers moving to better quality, larger and cheaper spaces in suburban and peripheral locations, it said.

Property consultants are still upbeat about investor interest in yield-generating assets.

“A number of large global investors, including a number of sovereign funds, have taken the first move by partnering with successful local investors and developers for investing in the Indian real estate market. This is expected to result in high transaction activity especially in income-yielding commercial office assets during 2014,” said Sanjay Dutt, executive managing director, South Asia, Cushman & Wakefield.

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