The Covid-19 pandemic has forced most companies to allow their employees to work from home.  Ever since lockdowns were first implemented in April 2020, a lot of office space for rent in Hitech City Hyderabad has been lying unused by the companies, which leased them. Even after the country began unlocking, most of the employees in Hitech City Hyderabad still continued to work from home.

Office Space Demand Is Disrupted, Not Work 

The pandemic has shown the world that a physical office is redundant, and people can jolly well work remotely.  The demand for office space has been disrupted, though business and day-to-day operations are going on smoothly with people working from home.  It has by now been widely reported that people are more productive working from home, happier saving time and money on the daily commute, and are able to maintain a better work-life balance. 

Many companies are, therefore, contemplating allowing work from home on a permanent basis to some or all of their employees. Where does that leave the market for office space for rent in Hitech City Hyderabad?

How Long Will the Disruption Continue?

Hyderabad was leading the country in the absorption of commercial and co-working spaces, with 10 million sq ft of office space absorption in 2019. The SEZ deadline of March 31 prompted many companies to absorb more space in the final few months of 2019-20. Savills India, an international property consulting firm, had predicted a 50% dip in overall occupancy for office space for rent in Hyderabad.

Savills had also predicted the markets to recover in 2021. But with a sudden second wave of Covid-19, that might not be the case either. 

Nonetheless, depending on when the second wave slows down or comes to a halt, office space for rent in Hitech City Hyderabad is predicted to recover faster from the Covid crisis than any other city. This is because Hyderabad has always been a very resilient real estate market, owing to its fairly moderate weather, lower cost of living and relatively lower rentals.  The central location of Hyderabad makes it a sought-after destination for international corporations looking to set up operations in India or outsource to India.  With incubation centres and startup-friendly policies of the Telangana government, Hyderabad is also a preferred choice with startups.

But will businesses get back to offices after the pandemic?  

What Happens After the Pandemic? 

Will work from home come to an end?

Going by the hints informally dropped by various companies, it looks like future models will tend to be hybrid in nature.  Leaders are inclined to allow employees to work from home for two to three days a week. In the future, the office space for rent in Hitech City Hyderabad will be a place where people come not to work, but to collaborate with co-workers. 

On the other hand, in spite of hybrid models, there may be increased demand for office space because of physical distancing protocols. For example, a pre-Covid 100-seater office may be able to accommodate only 60 to 70 seats because of the requirement for increased spacing between seats.

Gachibowli, Hitech City and the Financial District are convenient locations for renting office space in Hyderabad, thanks to the excellent infrastructure in the areas. Strategic flyovers, transit corridors and metro stations make the areas well connected and easier to drive through. Additionally, the Durgam Cheruvu suspension bridge which was inaugurated during the first wave of the pandemic is helpful for easing the bottlenecks in the area.

Aju Thomas of CIRIL — a commercial real estate brokerage company — notes that the government’s plans for the decongestion of Hitech City and promoting East Hyderabad to that end might get a major boost in the post-Covid-19 situation. Driven by social distancing, lesser travel time for employees, and the decongestion goals of Hitech City Hyderabad, areas like Secunderabad, Begumpet, Khairatabad, LB Nagar, Uppal and Mehdipatnam are likely to be revived as office locations. 

Office Rental Pricing After Pandemic 

Thomas of CIRIL further notes that with major economies, such as US, Europe and China going into recession, the demand side is expected to get affected and most likely the demand for IT space will go down. Demand may contract to 60% to 70% of pre-Covid levels. One exception according to him is if GOI decides to extend the SEZ application deadline by 12 months, then that could help build more demand.

With reduced demand and increased supply, rental pricing may also go down. The present lease rate in Hyderabad varies from Rs 55-65 per sq. ft. For Grade A spaces, the rentals range  from Rs 75-80 sq. ft/month. Due to lower demand and more supply, Grade-A rentals might settle for around Rs. 60-65 sq. ft/month. Suburbs like Kukatpally may touch around Rs. 45-50 sq.ft./month for Grade-A buildings. 

Impact on Coworking Spaces

Hyderabad has more than 50 coworking space brands and Covid-19 could turn out to be the death of co-working spaces. Apart from concerns for safety and social distancing, coworking spaces are typically more expensive than normal office spaces and may be considered not worth the cost during these pandemic times. 

Startups, who are the primary market for coworking spaces, may opt for work from home or go for independent office spaces in small ticket areas.

On the other hand, a few coworking spaces may survive if some companies opt for coworking spaces for their future hybrid models of remote and on-site working. Savills anticipates that occupiers will split their portfolios and go for multiple satellite offices. This might offset the decline in the demand for co-working and managed office spaces.

Finally, the pandemic could also affect the way lease or rental agreements are drafted in the future. Savills reports that said Covid has led to negotiations around contractual obligations, lock-in periods, exit notices, force majeure clauses, etc, from both a developer and occupier perspective. For all the latest news and views on the Hyderabad real estate market, log in to Property Adviser — Hyderabad’s best online real estate directory.