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Hyd sees highest rise in BFSI leasing in H1 2021

Office leasing activity in the three dominant IT hubs Bengaluru, Hyderabad and Pune declined by 55% against last year – from 62.35 mn sq ft in 2019 to 27.80 mn sq ft in 2020

Hyd sees highest rise in BFSI leasing in H1 2021

Hyd sees highest rise in BFSI leasing in H1 2021

Hyderabad Covid-19 pandemic has seriously disrupted the Indian office sector in 2020. The total sector-specific office leasing activity in the three dominant IT hubs – Bengaluru, Hyderabad and Pune declined by 55 per cent to 27.80 mn sq ft in 2020 against 62.35 mn sq ft in the preceding year.

However, these three cities are witnessing a significant rise in leasing activity by the on-IT/ITeS sectors like the BFSI segment. Prashant Thakur, Director, Anarock Property Consultants says: "BFSI firms are primarily attracted to these cities because of their more affordable rentals and the availability of relevant talent and workforce."

It is clearly a hedge against future disruptions and a bid to ensure business continuity. IT/ITeS hotbed Hyderabad recorded the highest rise in BFSI segment leasing activity. Of the total absorption of 12.35 mn sq ft in 2019, BFSI comprised a 10 per cent share. This nearly doubled to 19 per cent of the total 5.70 mn sq ft space leased in 2020.

Interestingly, out of the 1.02 mn sq ft leased in H1 2021, the share of the BFSI (banking, financial services and insurance) sector rose to 38 per cent. Bengaluru saw a similar trends - from an 8 per cent share in 2019 (of 42.6 mn sq ft gross absorption) to 15 per cent in 2020 (of 17.8 mn sq ft), and 13 per cent in H1 2021 (of 6.70 mn sq ft).

The Mumbai Metropolitan Region (MMR) – India's most expensive real estate destination - was once the nation's predominant BFSI hub preferred by most global and national players. Post the pandemic, many companies are adopting work-from-home and thereby optimising their operational costs.

Amid these new realities, the BFSI sector is finally seeing the feasibility of looking beyond MMR. Cities with sub dollar (under $1 per sq ft) office rents and enough relevant talent pools are now gaining momentum.

Meanwhile, many consulting companies' delivery centres are looking at Pune to set up base in. The city offers a healthy mix of industrial and IT/ITeS real estate, with lower rental values and burgeoning infrastructure also pivotal decision drivers. The increased preference for Pune as a manufacturing hub for companies shifting out of China has been a major demand boost for the professional services segment.

Out of the total 1.09 mn sq ft office space leased in Pune in H1 2021, nearly 13 per cent was by the professional services sector. In both 2020 and 2019, this sector's occupancy share was 7 per cent. In 2020, gross absorption in Pune was 4.4 mn sq ft while in 2019 it was 7.4 mn sq ft.

The IT/ITeS sectors will continue to lead in terms of share of commercial office leasing in these three cities. Demand for IT/ITeS-specific office spaces in Bengaluru, Hyderabad and Pune will gain further momentum in the coming years.

However, the emergence of an alternate demand driver is crucial for regaining ground lost due to the pandemic. We will see these cities' office markets see a DNA-level transformation in the post pandemic era.

Office Leasing Share in Hyderabad
Segment CY2019 CY2020 H1 2021
IT-ITeS 42% 47% 33%
BFSI 10% 19% 38%

Office Leasing Share in Bengaluru
Segments CY2019 CY2020 H1 2021
IT-ITeS 28% 48% 37%
BFSI 8% 15% 13%

Avg. Rentals (INR/Sqft/Month)
Cities 2019 2020 H1 2021
Bengaluru 75 77 80
Hyderabad 60 60 60
Pune 80 80 80
MMR 115 115 120

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