Hyd's office space development gets a boost as firms eye large workplaces

Global financial and technology firms' quest for campus-size office spaces is fuelling the demand for Grade-A office space in Hyderabad, which has been witnessing higher absorption rates besides the launch of projects of a bigger scale on the back of lower property rates.

"The large global firms are looking for Grade-A office space with a starting size of 0.5 million square feet in a single location and some might even require 1-2 million square feet considering their growth needs," Thirumal Govindraj, managing director of office space developer RMZ Corp, told Business Standard.

The Bengaluru-based company is currently executing a large commercial project, named 'The Sky View', in the city in partnership with homegrown business house MyHome Group.

The back-end operations and technology development centres of several global firms in the city are spread across different locations as these companies have gradually increased the local headcount as part of expansion exercises over a period of time. While tech giants such as Google and Amazon are in the process of building their own captive campuses to consolidate and grow their existing operations in the city, others are looking for leased office space of a similar scale for the sake of convenience and cost optimisation.

In a recent report, international property consultant firm JLL maintained that the commercial property development in the city has been mainly driven by the demand for Grade-A office space.

The 50:50 joint venture project involving high-rise twin towers – one SEZ and one non-SEZ – with 3.73 million square feet office space is being built on a 10-acre plot near Hitech City by RMZ and MyHome. It is positioned exactly to meet this demand.

The company expects to complete the SEZ tower by the end of 2018 and the other one in the following year.

"Going by the potential demand, most of which is coming from our existing clients, we expect to close the leasing of 70 per cent of total office space in The Sky View by the third week of 2018," Govindraj said. Responsible for marketing and managing the property for the joint venture, RMZ is said to already be in talks with HSBC and Qualcomm for large office spaces on lease in these twin towers.

RMZ is bringing around Rs 1,000 crore investment into the joint venture project and has plans to invest $1 billion in the next two-three years in Hyderabad as it seeks to create another 6-7 million square feet of Grade-A office space in this city alone.

By 2020, it plans to grow its portfolio to 60 million square feet from the current 20 million square feet level by acquiring ready assets and through green-field development in cities like Bengaluru, New Delhi, Mumbai, and Pune.

Global financial firms have been aggressively looking at expanding their operations in places like Hyderabad and Bengaluru and they are even expected to add HR-related work to their existing operations in India, according to Govindrajan.

"India continues to be an attractive destination for these global firms as the average lease rentals here have barely touched the one-dollar mark when compared to an average cost of $12 per square feet that they spend in the US. HR costs are at least 30 per cent lower despite the salary rises in recent times," he said.

RMZ Corp hopes to set a new benchmark of Rs 65-plus per square feet lease rental at Sky View as compared to Rs 40-45 of average lease rental for office space in the city. Even at Rs 65, these rentals will be on the lower side compared to the Rs 75-85 being currently charged for Grade-A office space in Bengaluru.

Meanwhile, RMZ Corp is planning to raise between Rs 1,200 crore to Rs 2,000 crore this year from sovereign wealth fund Qatar Investment Authority (QIA), mostly in the form of debt, and is also in talks with the Canadian Pension Plan Investment Board (CPPIB) for this purpose.

This additional funding would be used for expanding the asset portfolio besides providing an exit to Baring Private Equity Partners India, according to Govindraj. QIA and Baring Private Equity, together, have a 48 per cent equity stake in RMZ Corp, while the rest is held by the promoter family.

RMZ Corp's net operational revenue would be Rs 650 crore this year and it is expected to touch Rs 1,000 crore next year, according to the company officials.

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